The Enron's Ethics Breakdown
executive action
no. 15
february 2002
The Enron Ethics Breakdown
By Ronald E. Berenbeim
It is perhaps the most compelling business ethics case in a generation—a textbook version of what can go wrong in an organization that lacks a true culture of ethical compliance. Investors and the media once considered Enron to be the company of the future, but as its demise suggests, it was in reality not a particularly modern business organization, especially in its approach to ethics. On the surface, at least, it appeared to reject progressive innovation in governance and ethics programs and instead sought to circumvent systems that were designed to protect the company and its shareholders. The purpose of this report is not to comment on the legal or political ramifications of the case but rather to focus on the business ethics issues raised by the conduct of the company’s directors and officers, its accountants, and lawyers as it is known to date. It is meant to be a reminder that simply having a detailed code of ethics on the books (as Enron certainly did) is not enough. Organizations need to infuse ethics and integrity throughout their corporate culture as well as into their definition of success.
After all, being ethically literate is not just about giving large sums of money to charity—something that Enron did. It is about recognizing and acting on potential ethical issues before they become legal problems. Here, Enron appears to get a failing grade. Now a detailed look into the ethics breakdown at Enron and what it can teach companies about the importance of developing an ethics-based corporate culture.
Failure of the Market to Perform and Professional Dilemmas
In reality, there is nothing wrong with markets failing to fulfill their task of leveling the playing field between buyer and seller. Such market failures are in fact how many organizations make their money—through patents (temporary monopolies) and the use of expertise that is not universally
no. 15
february 2002
The Enron Ethics Breakdown
By Ronald E. Berenbeim
It is perhaps the most compelling business ethics case in a generation—a textbook version of what can go wrong in an organization that lacks a true culture of ethical compliance. Investors and the media once considered Enron to be the company of the future, but as its demise suggests, it was in reality not a particularly modern business organization, especially in its approach to ethics. On the surface, at least, it appeared to reject progressive innovation in governance and ethics programs and instead sought to circumvent systems that were designed to protect the company and its shareholders. The purpose of this report is not to comment on the legal or political ramifications of the case but rather to focus on the business ethics issues raised by the conduct of the company’s directors and officers, its accountants, and lawyers as it is known to date. It is meant to be a reminder that simply having a detailed code of ethics on the books (as Enron certainly did) is not enough. Organizations need to infuse ethics and integrity throughout their corporate culture as well as into their definition of success.
After all, being ethically literate is not just about giving large sums of money to charity—something that Enron did. It is about recognizing and acting on potential ethical issues before they become legal problems. Here, Enron appears to get a failing grade. Now a detailed look into the ethics breakdown at Enron and what it can teach companies about the importance of developing an ethics-based corporate culture.
Failure of the Market to Perform and Professional Dilemmas
In reality, there is nothing wrong with markets failing to fulfill their task of leveling the playing field between buyer and seller. Such market failures are in fact how many organizations make their money—through patents (temporary monopolies) and the use of expertise that is not universally