Enron Scandal and The Ethical Question It Raised

Enron Scandals and the Lack of Ethics Involved

Analysis of Issues Related to Social Contract Theory and Kant’s Categorical

Enron company was established in the year 1985, after the merging between Houston Natural Gas co. and InterNorth Inc. After this merge, the CEO of Houston Natural Gas hastily rebranded Enron company into an energy trader and supplier. Enron corporation became successful initially, but had quite a drastic and quick downfall. Shares from this company dropped significantly from nearly $90.75 to $0.67 by the beginning of January 2002. This was very difficult for the public to understand, especially since the company was awarded most innovative company in America. This company was run by corrupt parties who led to its downfall. Little ethics and moral reasoning were shown in the management of this company, which inevitably led to its downfall (Investopedia,2016).

There are several ways in which the CEO of this company withheld important information from other employees and shareholders alike. The major way in which this was done was by utilizing a technique called mark-to-market accounting. This mechanism is utilized when one trades securities, the measure of a security is based upon the market value of such, rather its book value. This is highly beneficial in securities, but detrimental to businesses. Enron utilized these methods by creating certain assets, for instance, a new power plant. Then the company would immediately allocate the projected profit on its books, without even generating a single penny. If a loss occurred from the company, the assets generated were sent to an unknown book and remained unreported to anyone. This strategy certainly enabled Enron Corporation to take losses without damaging the reputation of the company. These techniques were detrimental, however to the company once wind caught. What is in the dark will always come to light (Investopia,2016).

There are several ethical principles that were ignored during these scandals. Which would inevitably hurt not only the company but the trust of consumers alike. These scandals limited the trust that consumers had for large Corporations, and were one of the worst white-collar crimes of all time. These break the social contract theory for several reasons. One reason why this is unethical is because it was dependent on lies and hiding information. Under the social contract theory, it claims that these sets of norms for business procedures include the idea that they would be set in the likes of the people. Most people would not agree with this information being hidden. Although modern corporations are built on similar foundations, it is not acceptable behavior.

There are certain ethical standards and obligations that corporations should maintain. These are considered to be social responsibilities of business’s, and although they can be defined in several ways, there are certain circumstances that yield the tag of always being improper business moves. And this would certainly be one of those. I say this because one cannot hide such information from people, other companies were taking losses that were hidden from this one. Many people lost money and trust because of these scandals that took place (Investopia2016).

According to Wxiaom : “ Firstly, Enron’s competitive environments and rigorous performance evaluation standards caused a culture of deception. Since employees were nervous about losing their jobs, they only focused on how to make their performances look good. They ignored the ethical standards, and only focused on the achievement of their financial goal. After a few employees began cheating on their works, the only way to beat these persons was to cheat more” (Wxiaom,2012). As this quote exemplifies, we can see that one decision to cheat the system eventually led to a company comprised of mischief and illegal behaviors. This domino effect is what deprived the company of ethical workers and standards alike. This aspect relates directly to Kant’s categorical imperative. This theory states that one should dish out what they want back. Therefore, the highest degree demanded should be supplied in regards to ethics. Since, Enron set example of behavior, everyone else followed suit. But if he would have reversed the ethics to be of good nature, the rest would have concluded in accordance to this theory presented by Kant.

Enron worked extensively on trying to keep workers and outside parties’ quiet about whatever information or conclusions were found in regards to these issues. Whether it be the financial problems or executive decisions, Enron hurt numerous people. Not only those within the company, but also those not working for it. For instance, a man by the name of John Olson, lost his job because he advised a client not to invest in Enron. John worked for the Houston company, which enabled this to happen, because we all know who took over this small branch, the CEO. Enron hurt the lives of many people, and a company based on the principles of Enron is a company with no moral conduct at all (Wxiaom,2012).

Ethics should be integrated in business and corporations of all sizes. Although financial gains are generally the only code of conduct within, this is even true after these scandals. However, not every corporation operates as Enron, a majority do. I’ve come to this conclusion after watching the documentary The Corporation, this short film illustrates how most corporations function. It also compares many corporation’s activities and behaviors to the standards that a psychopath has. Corporations are diagnosed with these conditions in this documentary. Many unethical situations are produced by the greed of these huge corporations and consumers are the ones paying for it. Each business should pride themselves on a good moral foundation of honesty and trust.