Free «CSR in Enron» Essay Sample

Although the main aim of multinational corporations is to make profit and run a successful business, most of these corporations have started to enter every aspect of human lives to the extent that they become involved in various community works and social responsibilities. A new trend that reflects the corporations' interest to be deeply involved in social issues is the annual corporate social responsibility. CSR reports that are issued by most big corporations around the world. In these reports, corporations fully inform stakeholders and citizens about the social activities of a given corporation. In the article entitled “Two-faced capitalism” (2004) and published in the Economist, it is asserted that “the annual reports of almost every major company nowadays dwells on social goals advanced and good works undertaken” ("Two-faced capitalism). Although, CSR reports have become widespread in most corporations, people, NGOs and governments still have some doubts about the real intention of corporations when they issue their CSR reports. While some argue that these reports reflect sincere interest to help the community and be involved in social work, there are other analysts who belief that CSR reports are only strategies to advertise and publicize about corporations, with no tangible effect on society. To get a deep and comprehensive idea about corporate social responsibility, CSR in Enron Corporation will be insightfully analyzed in the following lines.

After experiencing more than a decade of corporate success and profit making, Enron Corporation faced a period of deterioration and loss. To hide its deteriorating status in the market, Enron adopted many illegal measures, such as fraudulent accounting practices, in order not to inform the public about its loss. As stated in the Corporate Scandal Sheet (2002), Enron “boosted profits and hid debts totaling over $1 billion by improperly using off-the-books partnerships; manipulated the Texas power market; bribed foreign governments to win contracts abroad; manipulated California energy market” (The Corporate Scandal Sheet). When all these illegal activities by Enron were revealed, the general public, as well as government officials, began to think of ways that could make corporations more socially responsible.

This debacle that overwhelmed Enron shocked the world, as it was considered a top ten company in the U.S. According to an article entitled “Enron Scandal at a Glance,” Enron grew in very short; while being the seventh largest company in the U.S., Enron caused a lot of problems for the state of California. At the peak of those lies the black outs that Enron caused intentionally in order to unethically gain more profit. Those blackouts damaged many people, resulted in the death of many people, and cost the state of California billions of dollars. However, it did not take long before Enron fell apart. Enron filed bankruptcy due to its mounting debts that were kept as a secret from its shareholders and even some employees for a long time.

Critically analyzing Enron's scandal, economist Paul I. Adujie realized that “the once mighty energy firm, which traded at $90 a share six years ago, is selling for 15¢, up 4¢ on the day after the verdicts” (Adujie, 2006). In his article entitled “The Enron Effect”, Adujie argues that shareholders lost about 60 billion dollars in the stock market. That is a tragic incident, and someone has to pay the price of lying, cheating, self-interest and irresponsibility. In this context, the credit goes to Sherron Watkins and not to the government. She was an Enron employee at the time and sensed that there was something going wrong. It started when she was reviewing an Enron’s accounting document and found simply that the math did not add up. She sent a letter to Ken Lay and later testified against Enron. A lot of people considered the board of directors including Fastow, Skillings, and Ken Lay as the major suspects, as they were the ones giving orders; while others considered the government to be responsible for all what’s happening due to their weak regulations which corporations adhere to and their inadequate supervision.

Consequently, Enron's scandal is an example of corporate irresponsibility that has been spread during the last decade. In fact, there was a sudden increase in the number of scandals that started to appear in the past few years. Enron exposes the unethical approaches that can be used by corporate managers to deceive customers and maximize profit, disregarding the consequences of their act. This lies in direct contradiction to the communist principles, which require that corporations should be guided only by the benefit of society. Actually, the increase in the number of corporate crimes may be considered an extreme implementation of Adam Smith's theory, which advocates that corporations are guided by their own benefit only, not that of society. However, it may be argued that corporate executives should be reliable and responsible people, as they hold in their hands the jobs of thousands of employees. Any irresponsible act that could be as a result of greediness could result in causing the corporate to fall apart. A clear illustration of this is the case of Enron. People all saw what happens to corporations as a result of their greed. Skilling, Fastow, and Lay were all unmoral executives. As a result of their irresponsible and unethical acts to suppress their greed, the corporation fell apart, and all its employees lost their jobs. Moreover, governments are being accused for their poor supervision and their insufficient regulations. Those regulations contain lucrative loophole in which some corporates take advantage of in a negative way. As one saw, Enron took advantage of this loophole and their plan was simple economics. When there are not enough resources to supply the demand, the price of a good (energy) increases. An attempt to prevent corporate crimes, corporate social responsibility is a necessary deterrent, coupled with government intervention; this will, in part, sustain business ethical practices which are necessary in the global marketplace.

Scandals such as that of Enron caused the majority of the public to believe that corporate managers and CEOs recurrently resort to unethical practices and are lying, in order to deceive the public and show itself as a socially responsible corporation. In his article, which is entitled “Corporate Ethics”, McRitchie (2008) cites many of the deceiving measures adopted by Enron prior to its fall. He states that “for three years, Enron was named one of the 100 Best Companies to Work for in America. In 2000, Enron received six environmental awards. It had progressive policies on climate change, human rights and anti-corruption”. Ironically, the CEO of Enron “gave speeches at ethics conferences and put together a statement of values emphasizing communication, respect and integrity”, while the reality of the corporation was just the opposite. This scandal deepened the lack of confidence between the corporation and customers. That is, a growing number of stakeholders have become unconfident in the revealed information about the corporation.

When corporations become reluctant to adopt policies of social responsibility, the government should react by imposing the strict laws that monitor the performance of corporations to ensure the implementation of corporate responsibility. In many instances, governments are accused of being irresponsive and weak in regard to the implantation of social responsibility. Governments start enforcing new laws and regulations only when a debacle occurs. They never take that first step, otherwise, something gigantic must give them a wakeup call and then they begin functioning. When the laws that monitor the performance of corporations are weak and ineffective, the result will be an extension to the Enron phenomenon. This is evident in the case of the United States, which has a law referred to as “Sarbanes-Oxley” Act, and issued as a result of the Enron Case. As noted in the Cato Hand book for Congress (2007), this law did not take any serious steps towards preventing scandals similar to the case of Enron. What the law invented is just a new bureau that has no clearly-defined regulations to follow, in case of corporation fraud. Alan Reynolds, a senior fellow in the Cato Institute, notes that Sarbanes-Oxley law requires that the CEO and CFO should certify that “their financial statements fairly represent financial conditions and results” (Reynolds, 2009). This item of the law contains loosely defined terms, such as ‘fairly’ and ‘financial conditions’. These broad terms make the law ineffective, as it becomes hard for law enforces to recognize when the financial statement is ‘fairly’ acceptable and when it is not. Accordingly, governments should provide strong regulations that are null and void of loopholes.

As seen in the documentary about Enron, it was obvious that the government did not perform its tasks properly. For example, how could the recordings of the traders discussions take so long to be examined. These recording were looked upon several years after they were recorded. In addition, the fact that a top 10 company (Enron) in the U.S is incapable of producing a balance sheet should have attracted the government’s attention so long ago. The government’s irresponsibility results in providing loopholes that corrupted corporations take advantage of in an unethical way. In his article entitled “How to Give Business a Soul”, Bradely (2006) argues that the reason of all those surfacing scandals is due to the government’s lack of involvement. Moreover, the government should hire internal cops as Webber discusses in his article entitled “The New Ethics Enforcers”. He argues that these internal cops have the right to review confidential documents, interview any officials, and even fire executives that are suspected to be guilty of a fraud. These internal cops are spread over 45 countries and have handled more than 100 cases. Although, it is nearly impossible to absolutely prevent such scandals, it is feasible to limit the number of “Enrons” that might occur on the future.

In conclusion, in the era of corporate scandals, corporations should adopt policies of corporate social responsibility and this should be coupled with adequate government intervention and supervision. Corporate businesses should adopt more ethical approaches because this is the way to maintain their profit levels and profit commitment towards their clients. Finally, businesses have to give an ethical model which contributes to the integrity of the whole society. In that sense, corporations should cooperate with governments in order to ensure the implementation of corporate social responsibility for the benefit of individuals, corporations and societies.


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