Lack of Ethics at Enron Case Study

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Enron Virtue Ethics

The author of this report is to pick three virtues from a list and describe how they were or were not applied in a certain instances. The virtues that can be picked from are justice, fairness, integrity, courage, honor and truthfulness. For the three virtues that are chosen, there will be a definition of each one. After defining each virtue, there will be an application to the Enron case. Indeed, there was not a lot of virtue when it came to the Enron case. It started at the top with Lay, Skilling and Fastow and there were a lot of other people that were actively involved in the fraud and depravity that was under way. At the same time, the ethical malfeasance on the part of those three men and the others led to a lot of people being victimized before and after it all blew up in everyone's faces. While there have been other accounting and corporate scandals in the history of the United States and the broader world, the Enron debacle set a new standard when it came to a lack of proper virtue ethics.

Analysis

The three ethics that will be discussed as it they relate to the series of events that was the Enron scandal will be fairness, justice and truthfulness. Before getting to how they apply to Enron, they will first be defined. When browsing the word "fairness" on the Merriam-Webster online dictionary, the author is steered to the work "fair." There are three overall definitions that are offered by the site. The first is "agreeing with what is thought to be right or acceptable." The second is "treating people in a way that does not favor some other others." The third and final definition is "not too harsh or critical" (Merriam-Webster, 2015). When it comes to justice, there are two main definitions. The first is "the process or result of using laws to fairly judge and punish crimes and criminals." The second definition if "a judge in a court of law" (Merriam-Webster, 2015). When it comes to truthfulness, there is a redirect to the word "truthful." When it comes to that word, this would mean "telling the truth" or "containing or expressing the truth." When it comes to the root word "truth," the first meaning is "the real facts about something." Another definition of truth is "the quality or state of being true." Finally, there is the definition "a statement or idea that is true or accepted as true" (Merriam-Webster, 2015).

Application to Enron

Fairness

When it comes to the word fairness, there are multiple ways in which fairness could be applied to Enron in particular or business in general. When it comes to business in general, the word fairness gets tossed around a lot but it can mean a lot of different things. When it comes to the profits and operations of businesses, many point to corporate social responsibility and consider it "fair" and even required (even if it's not in writing) for businesses to not charge what they can just because they have the ability to do so. Fairness could also be applied when it comes to business practices in general. Quite often, what is considered fair and what is legal are not the same set of actions. There are some laws that address some of the more devious actions like those that involve insider trading and the like. However, timely information and being in the right place at the right time is often the difference for a lot of people (Erb, 2011).

However, fairness is a whole different ball of wax when it comes to the whole Enron affair. One obviously example of fairness gone horribly wrong is the fact that the investors that were invested in Enron were left with pennies on the dollar, if anything, after Enron collapsed. For employees of Enron or anyone else that was completely and only invested in Enron, this literally ruined lives in many ways including retirement plans and savings in general. While it is obviously less than wise to only be invested in one type of investment, it is not the least bit uncommon for someone's entire nest egg to be their employer 401(k) or something else along those lines like profit sharing and the like. Another way of looking at fairness when it came to Enron was what happened to the three main ringleaders of the Enron scam. Kenneth Law was convicted of some major charges. However, he passed away between the time that the conviction took place and the time he was to have been sentenced.

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This was very fortunate timing for the wife and estate of Mr. Lay because this effectively made the verdict null and void and this would include any restitution, jail time and so forth. Jeffrey Skilling was also convicted. He lived to serve a jail sentence but had it reduced because one of the laws that was used to convict and sentence the man was not technically applicable to what he was accused of doing. As such, his sentence was reduced by a significant amount. As for Fastow, he himself lucked out as well because he cut a deal to testify against Lay and Skilling (Business Insider, 2011).

Justice

When it comes to justice, this very neatly dovetails with the fairness argument mentioned above. Many hold that the fact that Kenneth Lay died when he did should not have negated and nullified his sentence. Indeed, he was tried and convicted in a court of law. Just because he was unable to serve a jail sentence, at least to many, should not mean that his wife and/or other heirs should get to reap the money and assets that he accumulated on the backs of the fraud and the employees that were left penniless or close to it as compared to where they were before the scam. As for Skilling, many would argue that the prosecutor and/or the jury was incompetent and that if there was not a law that could put Skilling away for a good many years for what he did, there should be. As such, it is either the case of a prosecutor that was a bumbling idiot or the laws on the books were not designed to deal with what the Enron executives did. The deal that Fastow cut was all well and good if there was a good amount of payoff for letting him off easy. However, the principles of justice would seem to indicate that this was simply not the case. This is not the fault of Fastow. However, the problem remains that all three men, each in their own way, escaped justice to one degree or another and/or in one or more ways (CNN, 2015).

Truthfulness

As for truthfulness, this subject would be an amalgamation of the other two in many ways. For example, telling the truth is a funny thing when it comes to doing business. For example, a lie by omission is often used to keep or gain a competitive advantage. Since a lie was not technically uttered, many people feel that they are still technically in the right. However, there are many examples where this is clearly false. One of those would obviously be any situation where a company is publicly traded. Indeed, companies that are publicly traded are required by the law and agencies like the Securities Exchange Commission (SEC) to report certain metrics and data such as revenue, profits, operating margin, dividends and so forth. Enron did that but they were telling a lot of half-truths and outright lies when they did so. Indeed, they were shuffling money between subsidiaries in such a way so as to avoid reporting losses and other negative information to stockholders, shareholders and employees (Barrionuevo, 2006).

Stakeholder Impact

To state the obvious, the three virtue ethics mentioned above and how Enron clearly failed to uphold them had a severe and adverse effect on a huge number of stakeholders. Indeed, the stakeholders for Enron would include the executives, the employees, the energy customers that were being bilked due to Enron's market manipulations and the shareholders that traded Enron stock. It should be noted that a lot of the employees and shareholders were the same people as it is quite common for employees to own stock and they are often given a discount for doing so. However, regardless of how or why a person ended up having a financial stake with Enron, it obviously came to a crashing halt when Enron's fraud was revealed. However, the stakeholders involved go beyond Enron because the third party accounting firm Arthur Andersen was involved in the fraud as well. They were rubber stamping the incomplete or incorrect information that was being reported to stakeholders and shareholders (Hartley, 2014).

One can take all of this stakeholder talk to a different level. For example, an Arthur Anderson employee who worked for the company during Enron is going to have an awkward conversation or two about….....

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