“Just as character matters in people, it matters in organizations,” says Justin Schultz, a corporate psychologist in Denver.
Enron’s lessons will long be remembered, the deceit and unethical saga that led to the company’s failure in 2001 . Jeff Skilling, is getting a decade shaved off of his prison term that should now end in 2017.The truth of Enron represents the biggest business bankruptcy ever while also spotlighting corporate America’s moral failings. It’s a stark reminder of the implications of being seduced by charismatic leaders like Jeff Skilling who is languishing behind bars.
Enron is not the last case ?
Surely, if there are profits to be made, some type of scheme that attempts to skirt the law or even cross boundaries will occur. It’s been that way throughout history. But with each passing scandal, new rules and codes emerge that surpass those of the past. And while Enron won’t be the last case of corporate malfeasance, its tumultuous tale did initiate a new age in business ethics.
Are auditors to be blamed?
Enron, once a sleepy natural gas pipeline company, grew to become the nation’s seventh largest publicly-held corporation. But its shoddy business practices, aided by bankers and advisors feeding from the gravy train, brought down the company in December 2001.
A lot of people have suffered, not the least of whom are the shareholders and pensioners who lost it all. It was a sad “ending” to what had appeared to be a promising beginning to the New Economy in which the internet age would spread wealth and create jobs throughout the social spectrum. While Enron may be the crown jewel of corporate prosecutions, it was preceded by guilty verdicts for top execs at Adelphia Communications, Tyco International and WorldCom.
Punishment serves as a deterrent. But a clear-cut mission and a corporate code of ethics is crucial. It’s the foundation to which boards, managers and workers rely when they reach a fork in the road. It’s the principles they use when deciding whether to emphasize short-term gain or long-term stability.
Are there more causes?
Economist Milton Friedman has argued that it is the social responsibility of corporations to increase profits thereby putting more people to work and paying more taxes to support programs that benefit the general public. But business ethicists caution against a myopic pursuit toward earnings. The quarterly reporting syndrome that pressures companies to meet earnings expectations promotes temptation that can push some to distort the truth.
But the desire to satisfy shareholders must be balanced with the need to service all corporate constituents — all of whom contribute to a company’s worth. That structure must be reinforced with values that build trust, as well as by more cognizant oversight and notable penalties for egregious acts.
Are there solutions to greed that leads to unethical behaviour of organisations?
“So, even if you can’t really regulate ethics, the fact that more people are more closely scrutinizing board behaviour encourages directors to be more responsible,” says Mary Driscoll, an analyst with Standard & Poor’s. “But, there is no panacea, and I think we will continue to see abuses and excesses — but hopefully fewer.”
Ethical dilemmas are not always black and white, are they?.
And the situations that can lead to hard choices can be as complex as the options themselves. Some companies therefore struggle with how to manage and measure ethics and particularly in cases where they have worldwide offices that operate in diverse cultures. Those decisions have a direct bearing on their public identities and will affect their share prices.
Unethical companies will eventually get exposed?
Witness Enron. Companies that live and breathe their missions, by contrast, will get recognized by both the retail and capital markets. Stock values, of course, are a function of multiple factors. But solid principles are good for business, and ultimately good for corporation valuations.
Corporate codes are not charades?
They are practical approaches to everyday situations. Meaningful cultures will implore workers to do the right thing. That means individuals are encouraged to come forward with their concerns and know they will be heard and acted upon. Such a system allows management to address and handle issues in a holistic way to ensure strong ethical health.
Ethics is synonymous to success?
“Ethics and integrity are at the core of sustainable long term success,” says Richard Rudden, managing partner at Target Rock Advisors in New York State. “Without them, no strategy can work and, as Enron has demonstrated, enterprises will fail. That’s despite having some of the ‘smartest’ guys in the room.
Most individuals are raised with a sense of ethics that begin in their families, Is that lost in business? –
values that have been driven home through their schools and religious institutions. “Honesty” and “decency” have typically been applied in interpersonal communications. But such characteristics can get lost during business dealings. Enron is the poster child for such distorted behaviour.
just and ethical corporate culture , are there examples that can be cited?
But the company’s demise is not the end of self-indulgence. It’s simply a milestone. And while lying and deceit will always exist, there is a heightened awareness on the part of boards and investors. Without a doubt, corporate cultures must reward ethical conduct and penalize wrongdoing at every turn. Values matter: Ignoring trouble spots or blaming underlings is unacceptable.
The key to creating a just and ethical corporate culture is to breed fair and lasting business principles. Indeed, companies will be measured by the traditions they build and the way in which they manage their relationships with all the stakeholders!
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