Enron and Its Shortcomings

Enron’s overall business practices are not ethical. One business practice of Enron that I think poses an ethical issue is their attitude towards its employees. They create a highly competitive and a result oriented business atmosphere. They used a system where they would rank employees every half a year and fire employees who ranked on the bottom 1/5 of the scores. This kind of attitude where only results matter and if you don’t produce anything good you will get fired will only hurt the company. This promotes unethical behavior and getting what needs to be done to get good results no matter what and if you do well you will receive big bonuses. This approach towards Enron’s employees did not have very good utilitarian reasoning. This doesn’t help employees morale and psychological satisfaction. The cost of this kind of approach was very low because in fact you will weed out the slackers but the results Enron had where employees afraid to question unethical situations in Enron in fear of their jobs.

Another section of Enron’s business practice that is definitely not ethical is their accounting methods. In a technical aspect their accounting methods were fine, but this was only because of a loophole. Andrew S. Fastow was described as a financial whiz kid because of these loopholes that he knew how to take advantage of. Some of these things that he, and Enron, were able to take advantage of were the setups of special purpose entities. They would setup these special purpose entities and have either their friends or employees to invest in these special purpose entities so that Enron my say that their debts and liabilities are actually under the special purpose entities and not of Enron. This made it look like Enron didn’t have as much debt as it should have had.

A second practice in the accounting methods that were not ethical was their manipulation of their revenue. What they did was to make either their earnings more or inflating their stock. They would make sure that any potential deals that could make money in the future they wrote down in the books in the present, which is not a good accounting practice. Also they used sham swaps with other companies that would buy products and services with each other to make it look like they where making sales and money, when in fact that all they did was trade some assets and wrote a sale. All of these practices lead to a healthy stock price in Enron, which they needed so that they may borrow more money from creditors. All the borrowing from the creditors just put Enron in more debt.

The practice that Enron did violate the human right to be informed, is not just, and just didn’t have good utilitarian reasoning. They did not inform the shareholders, the employees, and the creditors about their practices or what the real picture was. The practices in accounting was not fair because they were not really working with money they actually had and kept doing business when other businesses in their position would, and should, re-evaluate how their business is run. The benefits and costs were not fairly distributed, this is because while most everyone that dealt with lost money in Enron when it collapsed the top management won out because they new what was going to happen so they sold massive amounts of shares of the company. Overall Enron didn’t solve any ethical dilemmas and they had unethical practices.

Social responsibility means that a corporation should be accountable for any of its actions that people, their communities, and their environments. Enron fell victim to the iron law or responsibility because they were not socially responsible for their actions. In the long run Enron lost its power in the world from