Ethical Climate of Enron Corporation

Introduction

This case study will dwell on Enron, an accounting firm that had numerous ethical problems. The most evident ones being the ones that dealt with human resources and the workers. Enron lacked a true culture of ethical compliance, it was considered as a pioneer company of the future but it was not to be, Due to lack of a good culture in accordance to business ethics to its client and its employees. Its top management which includes the directors, officers and accountants and lawyers were just out to benefit themselves financially at the expense of their workers who lacked motivation and clients who lacked proper delivery in services rendered.

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Enron had a book of ethics that they didn’t use they only used it to blind the government officials, thus having a book on ethics is quite contrary to practicing its content, this is to suggest that most of these multinational companies know business ethics but they don’t practice it to heart. Again they are torn between being loyal to their home countries laws and policies and the policies of the host countries. Multinationals should at least be able to infuse ethics and integrity throughout its corporate culture as well as into their definition of success. (Newton and Ford, 1992)

Business ethics

Business ethics can be defined as principles applied to deal with moral and ethical problems that a company might face in its day to day running with its employees and its clients. It encompasses the conduct of the business, individuals, and the business fraternity, business ethics deals with a wide range of perspective such as medical, technical, and legal issues. As modernity takes its shift business ethics is being practiced in the corporate world in increasingly good measures, governments too are taking wider strides to make laws that will govern these ethics to be followed to the later.

Business ethics take the following routes for it to be effected in an organization it can take either of the following courses; ethics of accounting information, ethics of human resource management, ethics of sales and marketing, ethics of production, ethics of intellectual property, knowledge and skills, international business ethics and ethics of economic systems. Our case study will lay on Enron and it will discuss its business ethics on human resource management in a globalized arena. (Newton and Ford, 1992)

Ethics of Human resource management

These are the issues that cover the relationship between the employee and the employer; such as rights and duties owed between the employees and the employer. Discrimination issues arise in this platform in the sense does the employee gets discriminated due to age, gender, race, religion, disabilities, weight, attractiveness. (Albertson 2007)It also encompasses the issues that arise in the traditional overview between the employee and the employer.

The issues of workers representation at the workplace through trade unions, issues affecting the employee on privacy matters, protection of whistleblowers, workplace surveillance on drug and substance use by the workers, the contract of the workers which should offer a balance of power between the employee and the employer, the worker should also be entitled to safety at the workplace, his contract should also spell out clearly his terms of tenure and benefits this includes retirement benefits scheme. All in all an employee cannot be hired and fired in accordance to age or weight or gender this is termed illegal. (Albertson, 2007)

Ethical problems in Enron as influenced with globalization

Ethics in human resource at Enron were typically in bad shape as discussed earlier in the paper with the workers getting the raw deal for instance the top managers, accountants and lawyers were paid highly at the expense of the support staff, this is a direct influence of globalization. Although at times globalization in a multinational facet creates more profits it tends to do so at the expense of the locals who get poor pay and lack motivation, the frustration that they are rendered to is so high that it extends to their retirement schemes. Thus is most evident in Enron’s collapse where many workers went home without being compensated.

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For instance take the issue of workers pays being held or blocked, meaning employees can not access their shares from Enron stocks thus their future are bleak with no hope. (Albertson, 2007)The workers at Enron’s were forced into investing into the company’s stocks which failed miserably. Thus the employees were basically tied down to the system and turned into slaves or puppets of the organization milking their life savings from them too. Enron can be described as a company that dealt with falsehood from their employees to even their clients. (Linda, 2000)

Perceptions

According to the ethical situation at Enron in regards to perceptions across cultures which is diverse in nature will take different approach. For example if Enron was operating in a corrupt country using its false hood nature of defrauding others it could relevantly do well because the system will support them and will allow them to deal with their dubious nature. This will go a long way in disheartening the workers the workers will lack motivation to work for this multinational company but due to the support being given by their respective country they won’t have the say or voice to put across their grievances.

At Enron where workers were forced to contribute their retirement money to the coffers of the company which later collapsed thus they were not able to access their benefits after working for years for this company. Thus how well or bad they are perceived literally relies on the countries laws, if it allows trade unions, if it allows under age employees, it will depend on the cultural organization and government policies of a particular country. (Linda, 2000)

Risks and Consequences

Risks and consequences brought about by the Enron situation whereby employees were not treated well by the management in accordance to their rights. When a company is not well regulated by the host country it tends to misuse employees in terms of their rights especially in forming unions and pay issues. The highest risks that are involved include mismanagement of the labor force of the workers. (Albertson 2007)

Most workers of multinationals tend to get lower pay especially locals compared to expatriates and when they are subjected to being forced to invest in stocks that involve the company while no surety is given to their money security. Thus such malpractices should be taken to account in accordance to the host country laws and regulations. The consequences of the above risk where the multinationals obey the laws of their home countries other than the hosts’ countries will prove difficult to the workers issues and rights because they will not be safeguarded and treated with respect thus the issue of being misused.

Most Enron workers in the United States are currently embroiled in court cases that will allow them to access their retirement benefits that are blocked. If the workers lack support from the top managers they tend to be unmotivated thus the level of production is reduced and this will affect the multinational profit margin which can end up sabotaging the whole company into a total collapse.

Recommendations

For an effective ethical procedure to take effect in a company the following recommendations should be effected. The company should examine its ethical climate and put safeguard in place this should be done in accordance to the cross section of the cultures involved, how do a certain community behave how can the company come into terms with the local norms and behavior. Secondly the companies should be obligated to put down its ethical profiles and exercise their written policies this again should be implemented into its internal and external programs, the top managers should practice this policies first as it trickles down to the low cadres.

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Thirdly the company should build a robust ethics infrastructure that is self-sustaining, fourthly the company should make a public stand that will describe its undertakings as ethical, the company should separate auditing from consulting function as from our case study Enron used to hire their own auditors thus they were able to cover their corrupt dealings. This is to imply that a company should contract an external auditing firm. The company should also open dialogue lines at all levels of the company thus it will be inclusive from the top management to the lower levels of the company. (Newton and Ford 1992)

Conclusion

As globalization takes its toll in the corporate world, companies are subjected to efficiently make use of their ethical procedures. Again they should be able to cover loopholes that are experienced legally when it comes to the host countries. The rights of the workers should be considered and their voices should be made to be heard through the creation of unions. Governments in the global communities should also make precedent measures that should follow up multinationals to safeguard the rights of the workers who are their citizens. Thus ensuring that corrupt dealings will not be undertaken in the host country, multinationals should be made to comply with the policies drawn down by the host country concerning workers’ rights.

References

Albertson, T (2007). the Gods of Business: The Intersection of Faith and the Marketplace Trinity Alumni Press.

Linda T. (2000) Managing Business Ethics: Straight Talk about How to Do It Right, 4th Edition, John Wiley and sons.

Newton and Ford (1992) Taking Sides: Clashing Views in Business Ethics and Society, Publisher: McGraw-Hill.

Solomon, Robert C. (1983). Above the Bottom Line: An Introduction to Business Ethics. Harcourt Trade Publishers.

Virághalmy, B. (2003). The excellence of the efficiency of the learning organization.

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