Ethics in Action

Ethics plays a large role in both business and in law. Ethics are the theory of moral practices that people should live by when dealing with any personal, business or moral dilemmas. Law and business are tightly intertwined in that ethics plays a large role in legal aspects of business. Companies must abide by the rulings of the court and provide any discovery evidence to the opposing party when required. The destruction of this evidence or refusal to provide evidence to the opposing counsel is immoral and can have severe penalties for the company.

Mallor, Barnes, Bowers and Langvardt (2004) analyze the ethics that played large roles in high publicized court cases in which the defendants either destroyed discovery evidence or withheld the evidence despite the court order to turnover such documents. The biggest scandal associated with Arthur Andersen was when the company became embroiled in a scandal with one of their biggest clients.

English: Morgan Stanley Building

Arthur Andersen (1885-1947) - In 1913, Arthur Ande...

English: Morgan Stanley's office on Times Square

The company was performing audits on Enron’s accounts when Enron was being investigated by the Federal Government. It was found that two of Andersen’s account managers were caught shredding critical documents that could be used in the prosecution of Enron. Farrell, a writer for USA Today reported in 2002 that “Andersen executives conspired to destroy Enron documents in October, knowing that the documents would be sought by government investigators and plaintiffs' lawyers.” (Ferrell, 2002) The company’s defense was that it was doing routine housekeeping procedures. The company, later that year, was found guilty for obstructing justice. This conviction led to Andersen having to surrender its licenses to the Securities and Exchange Commission because convicts are not legal to audit public accounts. While the conviction against the accounting firm was overturned in 2005, the company’s public reputation was already ruined.

The Ethics in Action vignette text shows...