Enron’s Code of Ethics
This writing will analyze Enron’s Code of Ethics and examine the sections on values and corporate responsibility, it will also use applicable theories and concepts and will detail Ken Lay’s view of ethics and Enron’s corporate social performance, as well as reflect Enron to be socially irresponsible to everyone with any type of financial investment in Enron because of the deception it practiced with employees and investors about its true financial status, despite having stated in its company code of ethics that transparency, integrity, and respect for the law would be the cornerstones of its daily operations.Enron’s values, as stated in the 2000 code of ethics, include the following: respect for others; openness and integrity; a premium on communication; a commitment to organizational excellence; and a commitment to non-discrimination. As it pertains to corporate responsibility, Enron’s code states that it (or its representatives) will do the following: it will comply with all relevant health and safety laws.It will emphasize safe operations because the company is devoted to protecting the environment, human health and natural resources; and the company pledges to enter into productive partnerships with the communities in which Enron is a part ” partnerships geared towards creating healthy families, and geared towards making the community stronger via education and environmental stewardship (Enron, 2000, pp.
5-6). Applicable concepts and theories explain Ken Lay’s view of ethics.For example, the wording of the document is aspirational; it demands that people hold themselves to the highest ethical and moral level and work constructively with partners to forge better communities (for a definition of aspirational, please see Ethics Resource Center, 2009). As well, the code of ethics and it’s values-centered insofar as its ethical ideals are among the first things discussed in the code; the code of ethics also stresses sustainability because of its focus on environmental and community stewardship (for a definition of both terms, please see Ethics Resource Center, 2009).None of the websites discussed in this paper take note of specific ethical theories when talking about what is acceptable or unacceptable for a company to do. However, there are two broad ethical theories ” deontology and utilitarianism ” that can be applied. Deontology holds that one must do right for the sake of doing right; utilitarianism holds that something is only ethical if it creates the greatest good for the greatest number(for a definition of both terms, please see Dictionary.
Enron’s Code of Ethics Essay Example
com 2009). Put another way, the outcome is all that matters when it comes to corporate actions.In the case of Enron, speaking the truth about its financial situation in1999 would have hurt the company by depressing stock value; it is also clear that company investors might have been forced to sell off stocks or take a financial “hit. ” On the other hand silence would keep people investing in the stock, therefore increasing the stock holdings of employees. A deontological approach would have favored full disclosure; a utilitarian approach would presumably favor not saying anything and hope that things turn around.Without question, Enron was socially irresponsible when it lied about its income and failed to reveal that its equity value was lower than its balance sheets said. At the same time, the company used its “partnerships” with the many companies it created to hide its losses and its debts.
Enron executives also ignored accounting irregularities and calmly kept millions in stock-market gains, even though they knew company employees who had stock in the organization were going to suffer when things came out (National Public Radio, 2009).Without a doubt, Enron betrayed its shareholders (its employees most of all) because it went against its own stated commitment to integrity; it eschewed communication for greed; and its creative accounting showed its real contempt for local and international business laws ” even though Enron (2000) claimed to respect the law (please see page 5 of the Code of Ethics). In retrospect, it is not clear that Enron had a compliance officer in place in 2000 when it formulated its code of ethics.However, it would appear that senior officials in the company would have the same responsibilities as any compliance officer: to ensure that the company upheld all relevant laws and regulations; to be leaders in the formation of ethical business practices; and disclose any information required by law or by company policy (Ethics and Compliance Officer Association, 2009). The leaders at Enron violated every one of their obligations and betrayed stakeholders.This paper reflects the sections on values and corporate responsibility highlighted in Enron’s code of ethics; the paper then looked at the pertinent concepts and theories that apply to the situation and answered the question of whether or not Enron was being socially responsible. The ultimate answer is no, Enron was not being responsible; the company hurt many people even though it undoubtedly thought that keeping things secret would serve the greater good insofar as it would give senior staff time to reorganize things without causing a depression in the stock holdings of employees.
In the end Enron destroyed its credibility and ruined many lives; all because it declined to follow its own code of ethics. Enron’s compensation and performance management system was designed to retain and reward its most valuable employees, the setup of the system contributed to a dysfunctional corporate culture that became obsessed with a focus only on short-term earnings to maximize bonuses. Employees constantly looked to start high-volume deals, often disregarding the quality of cash flow or profits, in order to get a higher rating for their performance review.In addition, accounting results were recorded as soon as possible to keep up with the company’s stock price. This practice helped ensure deal-makers and executives received large cash bonuses. The company was constantly focusing on its stock price. Management was extensively compensated using stock options, similar to other U.
S. companies. This setup of stock option awards caused management to create expectations of rapid growth in efforts to give the appearance of reported earnings to meet Wall Street’s expectations.