Many may look at the jail time served by some Enron leaders as being the main consequence of that scandal, but people lost their retirement savings and saw their entire lives transformed because they trusted news headlines about Enron being America’s “most innovative company” and the numbers they projected and bought their shares.Billions of dollars were lost, lives destroyed, investor confidence shaken and laws changed. The question that comes up now, is that to whom is the company responsible? The public, the investors, the employees, themselves?
Enron failed them all. It mostly comes down to the premise that just because something is legal doesn’t mean it’s ethical.Even though MTM accounting method is used in responsible, practical ways daily, by all kinds of ethical companies, but it was also used by the likes of Enron to fool millions of investors out of their life savings. As that occurred, the appearing to be on-paper triumphs permitted Enron’s executives to pay themselves over the top rewards even as the end was moving close. Kenneth Lay alone took advantage of more than $152 million in 2000, similarly as the sham was starting its end.The complexities of what was legal versus ethical is why Enron will be a lesson in business classes for many decades to come. And the scandal opened the door(Reflecting on the loop hole) to new, critical laws, as Encyclopedia Britannica explains, “The most important of those measures, the Sarbanes-Oxley Act ( 2002), imposed severe penalties for destroying, altering, or fabricating financial records. The act also prohibited auditing firms from doing any simultaneous consulting business for the same clients.
In the case of Enron, we saw the disadvantage of human beings. The executives of Enron are an intelligent group of people , but they ended up destroying the fortune they built in 16 years and also hurt many investors. The fundamental cause of this disaster is that they lack the idea of the business ethic compared to the rules. Therefore, when the executives encounter dilemmas, they choose the wrong way. To avoid another Enron, We have three suggestions for companies in today’s business world.
Firstly, companies should think about their corporate culture carefully because company culture will impact the decision of both the employees and employers when they face ethical dilemmas. Enron had competitive environments and strict performance evaluation standards. Besides that, Enron heavily focused on its financial goals and less or no importance was given to general ethics. If Enron gave more job securities to their employees, there might be less cheating on work. Additionally, employers could not make such decisions if they cared about the interests of their employees and other stakeholders. Therefore, companies should focus on building a healthy corporate culture.
Secondly, companies need to build a sturdy ethics infrastructure and practice it on a daily business. Only having ethical codes is far from enough as even Enron had a well written code of ethics, but many unethical behaviors still occurred. So companies should write a code of ethics and communicate it to all the employees and make sure they follow. Because If you have an ethical code, you should try your best to follow it. companies should aim to make their ethical standards a common sense in every person’s mind.
Thirdly, organizations need to learn business morals hypotheses and models since they are the moral premise in every one of the circumstances. For instance, in these hypotheses and models, the effects of your choices and the interests of related gatherings are underlined. These morals and models give out great methods of adjusting the interests of the multitude of related gatherings, so they can help you settle on the correct choices when you face moral issues. Leaders of business ought to have a decent information on business morals. At that point when they experience issues, they can realize what to do.
Therefore, to avoid another Enron, companies should consider whether they have a healthy business culture, whether they have a well-written code of ethics and also follow the code on every given day.