Enron Ethics

Essay by winston182University, Master's March 2007

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This article tries to show how the company's culture had profound effects on the ethics of its employee? And particularly in this case: how did Enron lose both its economical and ethical status? This question makes the Enron case interesting to us as business ethicists. Enron ethics means that business ethics is a question of organizational "deep" culture rather than of cultural artifacts like ethics codes, ethics officers and the like.

BackgroundAt the beginning Enron faced a number of financially difficulty years. In 1988, the deregulation of the electrical power market took effect and Enron redefined its business to energy broker and got a thriving company. The company became a "matchmaker" in the power industry, bringing buyers and sellers together. Enron embraced a culture that rewarded "cleverness". Pushing the limits was considered a survival skill; the motto of the CEO Jeffry Skilling was "Do it right, do it now and do it better".

This culture admires innovation and unchecked ambition and publicly punishes poor performance can produce big return in the short term. However, in the long run, achieving additional value by constantly "upping the ante" becomes harder and harder.

A lot of smoke and mirrorsWith Enron's spectacular success, the business community rewarded Enron for its cleverness and Enron's executives felt driven by this reputation to sustain the explosive growth of the late 1990s, even when they logically knew that it was not possible. In order to indicate that the company was not as successful as it appeared, Enron entered into a deceiving web of partnerships and employed increasingly questionable accounting methods to maintain its investment-grade status.

PartnershipsTo push the value envelope, Enron created "special purpose vehicles" (SPV), pseudo-partnerships that allowed the company to sell assets and "create" earnings that artificially enhanced its bottom line. Enron exaggerated earnings...