Free «The Scandal of Enron» Essay Sample

Enron's scandal is an example of corporate irresponsibility that has been spreading in the world since the last decade. 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 (Berenson, 2006). This lies in direct contradiction to the communist principles, which require that corporations should be guided only by the benefit of the 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 the society. However, it may be argued that corporate executive 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 (Sebor, 2009). A clear illustration of this is the case of Enron. We all saw what happens to corporations as a result of their greed. Skilling, Fastow, and Lay were all immoral 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 (Mulligan, 2008). As we 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

Corporations should adopt policies of corporate social responsibility in an attempt to limit the number of scandals that are emerging lately. Corporate Social Responsibility is operating a business in a matter that meets or exceeds the ethical, legal, commercial, and public expectations that society has of business. Corporate social responsibility can lead corporations on the right path. It provides a balance between profit and social responsibility which most corporation lack nowadays (Berenson, 2006). Furthermore, it helps gain the corporation a good reputation which is an imperative element in such a business. In an era where the board of directors and people who hold high ranks in corporations only think about money, it is necessarily to adopt such a policy. Due to the rising number of scandals that have occurred in the past few years, there has been a controversy about who should be blamed for the falling apart of these corporations. According to the article entitled The Social Responsibility of Business is to increase its profits, Friedman argues that the people who should be held responsible are corporate executives. Corporate executives are responsible of their employee’s actions due to the fact that they are the ones giving the orders (Mulligan, 2008). The difficulty of exercising "social responsibility" illustrates, of course, the great virtue of private competitive enterprise–it forces people to be responsible for their own actions and makes it difficult for them to "exploit" other people for either selfish or unselfish purposes. They can do good–but only at their own expense (Friedman). Executives should be ethical and moral people who aren’t only busy with their self-indulgence and achieving maximum profit. However that doesn’t mean that achieving maximum profit is unethical but it should be done in the right way. Corporate social responsibility can make a balance between maximum profit and social responsibility. For example, a company like Enron achieved maximum profit and gave high wages but it fell apart in a short while and suddenly due to the fact that its main characters and ways of doing the business were immoral and unethical. In addition, 5,600 people lost their jobs when Enron filed for bankruptcy. Therefore, it can be concluded that when huge corporations collapse, their employees suffer because they lose their jobs; hence, social irresponsibility can hurt corporations, employees, and societies at large.

When corporations become reluctant to adopt policies of social responsibility, the government should react by imposing 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 (Reynolds, 2007). . 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 wake-up 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, this law did not take any serious step 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). 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 (Joseph, 2007). Accordingly, governments should provide strong regulations that are null and void of loopholes. As seen on the documentary about Enron, it was obvious that the government didn’t 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 attention so long ago. The governments 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," economist Googins Bradely argues that the reason of all those surfacing scandals is due to the government lack of involvement (Bradely, 2000). 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 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 an era of corporate scandals, corporates 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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