The Impact of Unethical Behavior on Business, Employees, and Society

Nowadays, the world has become so advance with the advent of the internet and the latest technology making life easier. With the flow of changes, there are more competition, more opportunities, and challenges but it’s very important, to be an honest, loyal, calm and responsible person. Thus, when some people start to earn good money it makes them greedier to earn more and more which result in taking the wrong path. Ethic is defined as the basic concept and fundamental principles of decent human conduct (business dictionary, 2019). It includes human rights, equality, honest, obedient, fair judgment and proper use of powers. In other words, ethic means treating others in good manners. It is very important to have ethical behaviour as it results in fair justice. In an organization there is a mix of heterogeneous people with different moral beliefs and goal so its crucial to direct the employees in the right path with ethical behaviours and unethical behaviours ruins the company’s reputation, employee’s productivity and futures. Enron is a good example to depict the role of the board of directors and chairman conducting unethical behaviours such as inequality, fraudulent, greed, misleading, etc. which led to the collapse of Enron.

Enron was the world’s largest natural gas and electricity trading company in united states, established in 1985 by Jeffrey Skilling and Kenneth Lay. In the 1990s, Enron gained every corner of the market and became financially stronger over time, but Enron was conducting unethical behaviour by creating fake images to public and shareholders (Enron Scandal, n.d.). Enron initially started as a Natural Gas Company at the Pacific Northwest. In the following year, Enron started giving financial support to oil and gas producers and suppliers. Enron also launched Gas Banks which was greatly successful in the market. Over a period, Enron’s net value reached $100 billion so due to a fast pace of progress, the Enron created a committee which periodically tested and graded the employee. Enron stopped the trial and error method and hired the best of bests to increase the performances and pace of the company. On one side, Enron seemed to be grooming but, it was all fake. “Enron the smartest guys in the room’’ (Mclean, 2003). Kenneth Lay and his business partners were gambling, which was known as Enron Scandal, where everyone including the shareholders, investors were kept in darkness.

Enron collapsed mainly due to its greed though the company was running loss, increasing debt one on another Lay didn’t stop instead invested more and more. Enron’s greatest loss was Lay investing in the construction of Dabhol Power Plant in India,1995 which was a huge devastating loss to the company. At that time Enron’s prior goal was to supply gas and energy throughout the globe, therefore, found great scope in India. So, Enron invested $13.2 million on feasibility studies and invested $64.2 billion in construction. In 2001, constructions were completed but there was less demand for the private supply of electricity in India result in loss of time and money. It was a massive loss, but it didn’t stop Enron’s planning to touch the global market, so it starts with employee inequality. Enron’s Employee was not allowed to sell their shares and was for retirement saving which was a lie.

The subsequent collapse of the company was mainly and largely contributed by poor and careless conducts of the Enron board of director and lack of planning and transparency of Kenneth Lay. Enron had a misleading account as well. They manipulated financial status to encourage investors, shareholders, and employees to invest more. The major plan of the executives was to keep their stock price as high as possible. So that Enron would largely have many investors and expand their business, thus entitling them as the topmost company. This however started in 1990, when Jeffrey Skilling, The Enron’s chief operating officer hired Andrew Fastow. In successive years, Andrew Fastow began to manipulate its financial status. However, this was achieved by transferring Enron’s liability which would not reflect in its accounts. This would greatly make the market feel that Enron has the highest profit margin while having the least loans and debts, hence the stock price shoots to sky high. This encouraged investors to invest more money, shareholder to buy more shares and new employees to join the company. While the company played a foul strategy and kept everyone in disguise.

Moreover, the Enron’s board of directors and its member didn’t make a realistic decision while supporting firmly with the chairman, Kenneth Lay which furthermore encouraged to expand business while the risk factor to bear losses increased exponentially with more expansion and investment in business (The role of the Board of directors in Enron's collapse, 2002). He didn’t in-calculate the profit margin but focused on expansion even when the investment brings up a zero profit to the company. Therefore, most were unsuccessful and caused him in heavy debt slowly and steadily due to his greediness.

In the field of electricity, Enron made a huge profit and hike in the price of electricity over a very short course of time. Enron acted smart and studied every strategy so that they could get optimum profits. They sorted every loophole and took advantage of it, making good use of the weaknesses thus making a huge profit and hike in price by foul strategies played by the trader of Enron. Blackout in California caused people to suffer, offices, enterprises, and outlets had to remain closed due to no power supply causing huge losses to other business entrepreneurship (Gibney). Moreover, Enron’s artificial shutdown of electricity caused no monitorization in traffics causing accidents, traffic jams. traffic police had to regulate the traffic signal manually to avoid obstructions and colliding of traffics in intersections.

Enron created an artificial shortage of electricity by shutting down the power supply which caused the price to shoot up to the skyline abruptly in California. in the meanwhile, Enron was trading electricity or power supply other states when there was a complete power shut known as the blackout in California and Enron made a huge profit as high as $2 billion by West coast Trader of Enron (Gibney). Thus, Enron’s strategies turned out as casino playing with money and making numerous profits with a foul and unethical motive.

In 1990s fiber optic technology had huge progress in and around the world, seeing that multi-companies strengthening and flourishing and extending their business, Enron also made an attempt in the field of Fiber Optic Technology (Enron, 1990). In 1997- FTV communications LLC had a major construction on 1380 miles of fiber optic between Poland and Las Vegas. Enron in 1998 had a major construction of building in the run-down area of Las Vegas near E-Sahara, acting as a backbone of fiber optics cable which could provide service to technology companies nationwide (Enron , 1990). Enron had the best location of the building as the location had the ability to send data anywhere in the world within a minute and could stream video to the entire state of California.

By the mid of 2001, Enron started to face some losses in broadband services. A 20-yrs deal between Enron and Blockbuster INC was canceled on 12th March,2001which lead to drop of Enron’s share from $80/share to $60/share (Enron, 1990). So, Enron started to face huge losses and drop in share price which leads to bankruptcy.

In 2007, Enron finally collapsed with 22000 employees lost jobs plus public, shareholders were in roads. Enron scandal was exposed in 2001 showed financial status and share prices of a company which was a huge confusion and misleading of trust. Kenneth Lay, the chairman was not only responsible of Enron collapse but the Board Of Directors and its members were equally responsible as they allow Lay to take a high risk, making unrealistic objectives, greed and poor monitors of employees, misleading of financial accounts and manipulation.

To sum up, it’s very important to have ethical behaviors in an organization or any workplace to have good productivity, warm working environment, equality. In the case of Enron which collapsed due to unethical action performed by Kenneth Lay and his board of director leading to huge loss to the company, investor, employee, public in financially and mentally. According to (Mclean, 2003) Kenneth Lay was considered as the smartest guys in the room as he showed his smartness to manipulate entire share price so that he can keep the pace of attracting more and more investors and their trust. And Kenneth lay was overconfident with his instinct and quick decisions which were a risk analysis performed by him and his broad of directors. Though Enron was running into loss, they didn’t control their greed of earning instead they started to follow the path of gambling and fraud which they were able to make short term profit but subsequently their business in every field they invested started to fail, profit started getting minimized and finally Enron collapsed. Thus, investors, shareholder, public lost their money and employee lost their jobs which were a huge loss to the country. So, Kenneth lay should have focused on excelling in one field rather than trying to flourish business in different fields.

References

1. business dictionary. (2019). Retrieved from http://www.businessdictionary.com/definition/ethics.html
2. Enron . (1990). Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Enron#Data_management
3. Enron. (1990). Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Enron#1990
4. Enron Scandal. (n.d.). Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Enron_scandal
5. Gibney, A. (Director). (n.d.). Enron The Smartest Guys in the room [Motion Picture].
6. Mclean, B. (2003). The smartest guys in the room. Retrieved from https://en.wikipedia.org/wiki/Enron:_The_Smartest_Guys_in_the_Room
7. (2002). The role of the Board of directors in Enron's collapse.