The Enron bankruptcy and the subsequent collapsing case is probably one of the largest such case ever experienced in the American soil. Enron was an energy firm operating from Texas, America and which was crippled after a number of fraud cases executed by some of its top officials. Enron Company was at some point considered as one of the most successful firms in the USA and it actually came as a shock to many when it announced its bankruptcy status in 2001. What ethical issues or lessons can we learn from the Enron case?
Ethical issues at the Enron case
- Laxity of the board– One thing that is clear about the Enron case is that the board of directors did not show enough interest in regulating and supervising the operations of the company. It appears that the board was contented and there was no need to question anything since the firm was reporting huge profits. The ethical issue here comes in the role of the board in supervising or controlling the management. It’s the role of the board to ensure that the interests of the stockholders are taken care of. In this case, due to clear laxity of the board, stockholders lost billions of money.
- Conflict of interest– It is the responsibility of an auditing firm to work with the board of directors to ensure that the interests of the stockholders are taken care of. However, in this case, it appears that Arthur Andersen also acted as a consultant to the Enron Company. This means that the auditors were also concerned with the prosperity of the Enron Company and could therefore not be in a position to expose the fraudulent activities of the firm.
- Short-term profits– Every firm should have a goal of creating stable development rather than short-term profits to please the world. Although the short-term profits were received in good faith by everyone including the investors and the auditors, these quick and unstable fortunes disappeared when the fraud was discovered. The ethical aspect here is the role of the company. One can’t stop wondering whether the firm was a money-making machine or a productive and stable company with an aim of empowering everyone and the community.
- Greedy– Greedy and selfishness is evident on the part of the top executives and even the CEO of the Enron Company. It is the role of any business administration to not only take care of the interests of the firm but also those of its employees and stockholders. However, in this case, we see people who are only interested in enriching themselves at the expense of the investors who lost billions of money and the more than 20,000 employees who lost their jobs. Some of the employees even lost their lifetime savings!
As you can see from above, it is clear that several ethical issues can be identified from the Enron Company collapse case. It is very important for any employee, regardless of their power and position, to practice acceptable ethical behaviours and practices for the greater good of everyone.