Ethical Dilemmas of Enron Corporation

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Running Head: ETHICS
Ethical Dilemmas of Enron Corporation
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Ethical Theories of Egoism and Deontology:
The egoism is treated as a part of philosophy, the ethical theory of egoism is about the
treatment of the self-interest for morality. The claim made by the ethical egoism is that the
actions and performances are taken place for enhancing the self-interest of individuals (Levit,
2014). It evolves with morality with the pursuit of self-interest. The egoism tends to comply with
the interest of an individual rather than the good for the people around and this can result in the
creation of a huge conflict in the same surrounding (Jason, 2014). However, ethical egoism is the
opposite of the assumptions that are already existing in philosophy. As discussed above in case
of the occurrence of the indifference of the interest then ethical egoism can never provide with
any kind of solution to that particular issue.
For Enron the conflict of interest occurred when the partnerships were presented to be
from the outside investors but it was seen to be internal. The officials of the company have
eventually closed the paths of the partnerships which were classified as per the rules from FASB
(Sims & Brinkmann, 2003). Many officials starting from the CEO to the managing directs were
associated with the partners companies. Hence, the egoism was clear to occur through the
conflict of interest between the officials.
In the arena of ethical theory, deontology is the rule that differentiates the correct from
the incorrect. This rule is mostly associated with Immanuel Kant who is a philosopher, he shared
his view on deontology that the actions taken under ethics are mostly are the followers of the
universal laws of morality. The implementation of deontology is easy, such that people must
have the sound knowledge of the rules in their area of action and complete their duties (Tsalikis,
2018). This is also applicable to the human intuition of right or wrong ethical practice.
Deontology does not deal with the benefits or the required cost from any situation. This does not
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consist of any uncertainty or subjectivity as the rules that have to follow are pre-defined.
However, blindly follow of deontology can be unacceptable to many irrespective of its strength
available. A contradicting situation of deontology can be observed if a missile is launched for
harming people and a person gets its update, he might want to stop it by hacking the system.
However, this situation will be going against the rules as well as breaking the codes of
professionalism, which is totally against deontology. It has be considered to be consistent in most
of the general situation as the duties are carried out well in the name of ethical perspective (Filip
et al., 2016). Hence, the theory is applicable mostly in the practical situations. The ignorance of
the ethical decision making gets attached to deontology too as consequences of action are of no
one’s control. Threshold deontology comes to the rescue of the prior situation with several
benefits for the emergency situations.
As per the case study is concerned, it was totally wrong from the perspective of Enron to
keep the details of the company from the public which were of totally their interest.
Application of AAA Model for Decision Making:
The AAA model is the abbreviation of American Accounting Association model that presents a
specified structure for taking ethical decision within it. It was developed in the year of 1990 by
Rockness and Langenderfer, they have propped a step by step process that goes up-to seven steps
for taking decision totally in an ethical way (Brown-Liburd, Issa & Lombardi, 2015). The seven
steps are as follows:
(1) Establishment of facts- This is the first step of the process carried out for taking the decision
and in this step the consideration are unambiguous.
(2) The ethical issues are identified for the undertaken case- The facts of the undertaken case
are laid out with the aid of asking the issues of the case specifically related to the ethical aspect.
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(3) Principles, norms and values are identified for the undertaken case- The decisions are
placed for the variable context such as the ethical, behavioural and social. For the identification
of the norms, principles and values the code of ethics in the professional field as well as in the
occurrence of expectation in a social environment (Banker et al., 2014).
(4) Identification of all alternative actions- The actions are stated clearly without taking the
norms, principles and values under consideration in the context of professionalism. The outcome
of each action are considered which is mandatory to happen. This takes place irrespective of its
appropriateness.
(5) Principles, norms and values are matched with the available options- The identified
norms, principles and values are presented and matches with the available options that are found
in the prior step. Eventually, the taken options that are associated with the undertaken norms,
principles and values are observed also which does not.
(6) Associated consequence are taken under consideration- The implications that are obtained
from the above steps are all unambiguous which the ultimate goal of the model (Shipman,
Swanquist & Whited, 2016). The final decision will be totally based on the overall knowledge
acquired and implementation of the actions with highest priority to each.
(7) Appropriate decision making- After following all the prior steps, then the appropriate
decision is taken.
The scenario for the undertaken case study is Enron a mega business, with its increasing
popularity in the business community and its competitive culture, the working officials of Enron
had to keep their reputation at top. They went for making partnership and taken up questionable
methods of accounting to keep their status high. The creation of the pseudo partnership made
them to sell the assets and generate earnings for the company. In the overall process they have

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SPVs, the earning from it were keeping the company’s balance sheet clean and far from debts.
However, keeping the debts totally off the table was never possible hence some were show in the
SPVs balance sheet but keeping it away from the analyst.
As per the AAA model is concerned, the steps can be seen as:
(1) Establishment of facts- The facts of the company must be laid out as they were facing a
downfall in the financial aspect. This occurred due to their illogical partnerships to rise their
profits from the companies their officials already own (Cohen & Simnett 2014). Enron in its
earlier days was considered to be one of the pioneer in its industry but it eventually for its
cleverness, wrong decisions and ethical practices in the long run it cost them a great deal of debt
in huge numbers of hundreds and millions.
(2) The ethical issues are identified for the undertaken case- The unethical practices that the
company have been practising was totally because of the office culture of aggressive cleverness,
individualism, this all resulted in the leaders to be irresponsible and un-compassionate towards
their works. The behaviours of the higher officials were totally not acceptable and the statement
of the code of ethics of Enron shows that it was not followed at all the first one to be the
improper communication between the employees.
(3) Principles, norms and values are identified for the undertaken case- The principles are
based on the ethical perspective only as the employees have to follow and consider so that no
employee get prompted. The commitment of the employers are most valuable for the principles,
norms and values that Enron have to follow (Tan et al., 2014). The leaders of the company have
to be most concerned in the proper conduction of the ethical values, principles and values. Also
this was seen to come into actual practice by Cooper.
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(4) Identification of all alternative actions- As discussed in the caser study that mechanism of
Schein is taken into consideration by the executive of Enron to reinforce the morality of the
company again and gain back the ethical norms of the company. One alternative is the use of the
five influential mechanisms, the unethical practices of the company by the leaders must be
audited at the initial stages or brining new leaders to the company.
(5) Principles, norms and values are matched with the available options- The principles,
values and norms that have been identified will be used to channelize the ethical practices with
the alternatives identified in the prior step. The best was the joining of the new CEO and
performing the five influential mechanisms.
(6) Associated consequence are taken under consideration- The consequences of the first
option that is with the follow up of the step by step mechanisms that is attention, reaction to
crisis, role modelling and lastly allocation of rewards will be beneficial in the long run (Amel-
Zadeh & Zhang, 2014). The second is the audit of the actions of leaders from the beginning, this
can also result in the positive way, as the actions an d all the transaction for the partnerships can
be traced at the initial stages then the actual details of the partners can be available from the
earlier time and that time only theorise partnerships can be cancelled.
(7) Appropriate decision making- The final decision of the change of the CEO was the best and
it was favoured that the following of the five step influential mechanism is profitable to
incorporate in the company for valuable ethical practise that will eventually increase the profit
and good name of the company in its industry.
Application of Decision Making of Ferrell, Fraedrich and Ferrell:
According to Ferrell, Fraedrich and Ferrell, the process of ethical decision making is
about the identification of the issues of the ethical aspects and the related group or individual
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associated with the unethical practices. The action of them are reviewed to be wrong or right.
Another important aspect that those individuals must also understand that they have done ethical
practices. The process of ethical decision makers have the sensitivity toward the individual or
group that have practiced the unethical work. It has been established that the individuals of
ethical practise are confronted with six influences of sphere, which are religion, profession,
workplace, legal system, community and family (Ferrell, Fraedrich & Ferrell, 1991). All this
aspects together has a huge impact on the decisions that the decision makers have. The other
aspects that that effects the sense of the decision makers are their moral senses, these also
connected with the perspectives that the decision makers have with the ethical aspects. An
individual’s perception is also effected by the pressure that the society puts on their decision
making (Schwartz, 2016). The influence that the ethical issues has through the management are
the corporate politics, use of punishments and rewards, etc. The perseverance of the employees
are more important for incentives of positivity and negativity of the ethical issues.
It is expected that ethical issues are present for providing awareness to employees and
educate them for the areas of problems. It must help them to develop their skills to take better
decision in terms of ethical aspect in their field of work. As Ferrell, Fraedrich and Ferrell said
that any organization that has diverse cultured people with varied cultural background must be
trained well to come to a single ground. The identification of the ethical risks and issues which
the employees come across in their daily work must understand those in the common ground of
the training and take the best ethical decision to develop their abilities in the long run (Ametrano,
2014). In any organization or company several groups as well as individuals tend to cater
information of the organization to chalk out all the possible ethical decisions. The areas that are
laid out to the organization must be a rigid areas of the ethical issues, the highest prioritized one

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will have most of the effect on the employees. When it is found that the ethical issues are given
importance in the environment of the company then it makes a huge difference on the
perceptions of the employee’s behaviours, judgements and intensions (Valentine et al., 2014).
Hence, the individuals with strong understanding gives preferences to all the ethical issues and in
contrast the other individual will possess to have unethical behaviours and quite questionable
too. Hence, one of the important consideration at the time of taking ethical decision the intensity
of ethical issue must remain important.
As per our undertaken case study, Enron and its leaders were not much of an ethical
decision maker. They have been seen to have high egoism quality and deontology as seen earlier.
It somehow also depend on the society around such individuals as they respond of ethical egoism
is a matter of fact between two individual’s good and one perceived to serve one’s self-interest
(Weiss & Peres, 2014). This eventually becomes conflict and its solution becomes an overall
ethical system. An aspect of deontology is contradicts with the consequentialism as the actions
that are carried out under deontology is totally in accordance to the duties and the consequences
of the actions that are done under deontology have no relevance with the ethical side (Filip et al.,
2016).
Enron’s leaders had taken the worst decisions in terms of taking partnership with the
companies owned by them only which turned out to be huge loss for the company for them, the
debt was increasing day by day, but their ego was above all. So, they did not accept the truth in
front of the other employees (Lee & Selart, 2014). However, the debt came to light and they have
to pay for hundreds and millions in an immediate situation. This was seen as a dilemma in taking
proper decision by the decision makers of the company. The shuffling in debt is a clear example
of it. Enron was keeping the actual details away from public because if that was disclosed then
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strict accounting methods have to be taken for the company (Burton, L., & Peachey, 2014). This
was quite not possible for them and in place of that they have hired the outside accounting
services. This partnership was more of a showing that it was from investors however, these were
the companies that was owned by Enron only. As per the authors the key indicators must be the
intensity of ethical issue, however, the heads did not considers any of the ethical aspect while
taking the decisions for the company in generating profits for the company and in place is that
they were busy fulfilling their ego and self-interest (Xu, Loi & Ngo, 2016).
The ethical decision making is a huge part of the success of any company and for Enron
too. So when the new CEO, Cooper will follow the five influences for the ultimate ethical
environment promotion in the company, the employees will be exposed to the strong ethical
culture of office with thoughts and opinions oriented towards the ethical decision making only.
At the end the actions of the employees can be guided towards the ethical norms with the
practice of ethical principles by all the executives and officials. In contrast to the new CEO, the
former one only took decisions that pulled funds for their own individual interest (Wu et al.,
2015). Another aspect of decision making is the ways that the leaders recruit employees in the
company and dismissal them. The selection must also be totally unbiased, with the ethical
principles and fair to all. The employees must be judged n their abilities and valued accordingly
and not favoured on self-interest.
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Reference
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