Transcript Key Enron Players - McGraw Hill Higher Education

Chapter 5
Business,
Societal, and
Ethical
Contexts of
Law
McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
BUSINESS ETHICS

Attention to business ethics is critical during
times of fundamental change such as the
financial crisis that began in late 2008.

In such volatile times, unethical and/or illegal
practices are often highlighted.
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Moral Philosophy

Principles-Based Approach –
Ethical decisions made according to a
set of established principles such as
religious tenets.

Consequences-Based Approach Provides the most good for the greatest
number of people.
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TRAITS OF EFFECTIVE ETHICAL
PROGRAMS

Management has articulated a clear vision of
integrity throughout the organization.

Reward systems are aligned with the vision
of integrity.

Responsibility is seen as individual rather
than collective so that individuals are willing
to assume personal responsibility.
5-4
TRAITS OF EFFECTIVE ETHICAL
PROGRAMS cont’d

Policies and practices of the organization are
aligned with the vision.

The vision of integrity is well integrated into
the decision-making process so that any
significant management decision has ethical
value dimensions.
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CORPORATE SOCIAL
RESPONSIBILITY

The fundamental notion underlying CSR is
that conscience resides not just in individuals
but also in a corporation.
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The Enron Scandal

The systematic looting of the corporation by
its executives and the massive fraud and
subsequent cover-ups that culminated in a
public crash made Enron the symbol of
corporate greed and arrogance.
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Key Enron Players

Lay - Chairman

Skilling - CEO

Fastow - CFO

Causey – Chief Accountant
5-8
Arthur Andersen

Anderson was Enron’s CPA/Audit firm.

The government indicted the entire firm of
Arthur Andersen on charges of obstruction of
justice.

Anderson went out of business.
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The Narrow View: Invisible Hand

What is good for business is good for
America because the market’s efficiencies
provide an invisible hand that guides morality
and responsibility. Corporations acting
unethically would inevitable suffer.
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The Moderate View: Government’s Hand

The regulatory hands of the law and the
political process, rather than Smith’s invisible
hand, provide the basis for ethical decision
making.
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The Broad View: Management’s Hand

The broadest view of CSR is that
corporations have a social responsibility and
that profitability is secondary.
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learning outcomes checklist

5 - 1 Articulate a working definition of
business ethics.

5 - 2 Differentiate between primary and
secondary stakeholders.

5 - 3 List alternate approaches to ethical
decision making based on different theories
of moral philosophy.
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learning outcomes checklist

5 - 4 Identify the challenges to business ethics management and
articulate a response to each challenge.

5 - 5 Define values management and articulate several reasons
why values management is important in business operations.

5 - 6 List the common traits of an ethical organization.

5 - 7 Demonstrate an understanding of how to develop a code of
ethics and conduct.
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learning outcomes checklist

5 - 8 Employ an ethical decision-making paradigm
used by managers for resolving ethical dilemmas.

5 - 9 Give examples of ethical lapses using historical
case studies of businesses facing ethical dilemmas.

5- 10 Articulate the various views on corporate
social responsibility and defend a particular view.
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