Enron Ethics Report: Examining Corporate Ethics and Decision Making

This report provides an in-depth analysis of the Enron ethics scandal, examining the factors that led to the company's collapse. It explores the application of ethical theories such as Egoism and Deontology, along with the AAA model and the Ferrell, Fraedrich, and Ferrell model, to understand the ethical decision-making processes within Enron. The report details the ethical issues, including the manipulation of financial statements and the erosion of corporate culture, and assesses the consequences of various courses of action. The conclusion emphasizes the importance of ethical conduct and corporate governance in preventing such failures. This report provides a comprehensive overview of the Enron case, offering valuable insights into business ethics and corporate responsibility.

Running head: ENRON ETHICS
Enron Ethics
Name of the Student
Name of the University
Author’s Note

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Executive Summary
There are so many such cases, which emphasize the significance of the ethical conduct at work
place. Enron is the case study in the ethics and the story of the America’s biggest fraud. The aim
of this report is to identify the potential illegal or unethical moral behavior that should be applied
while confronting with the ethical dilemmas. In this report, the theories of Egoism and
Deontology, AAA model and the model of Ferrell, Fraedrich and Ferrell are applied for the
ethical decision making process. By this study of the Enron, this can be concluded that, the cards
of the Enron’s house had collapsed as the result of the process of the interacting decision, this
culture eroded at Enron slowly by trespassing of the ethical boundaries and by allowing the most
questionable behavior for slipping by the cracks.

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Table of Contents
Introduction......................................................................................................................................3
Part A: Ethical Theories of Egoism and Deontology......................................................................3
Part B: Use of AAA Model.............................................................................................................4
Part C: Apply Ferrell, Fraedrich, and Ferrell model........................................................................8
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

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Introduction
In United States, the 2002 Sarbanes-Oxley Act was passed for multiple vital scandals of
corporate accounting, which occurred in the year 2000-2002 that includes the fraud and
corruption at Enron on the colossal scale (Kumar & Aldous, 2015). There are so many such
cases, which emphasize the significance of the ethical conduct at work place. Enron is the case
study in the ethics and the story of the America’s biggest fraud. The purpose of this report is to
identify the potential illegal or unethical moral behavior that should be applied while confronting
with the ethical dilemmas. In this report, the theories of Egoism and Deontology, AAA model
and the model of Ferrell, Fraedrich and Ferrell are applied for the ethical decision making
process.
Part A: Ethical Theories of Egoism and Deontology
The ethical egoism is a theory, which the advancement of the good as per the morality of
the organization. In this potential version, this is organized that this will be moral for promoting
the good and this is moral for not promoting it (Caliskan, Akbas & Esen, 2014). In the imaginary
construction of the Enron corporation by the single aspect, this is possible in pursuing the
morality, which is similar to the pursuit of the self-interest for the agent. There can not been arise
the occasion while the agent should not pursuing the self-interest in the approval of the other
ethics until the agent produces the other moral process in which, the needs in renouncing of the
values and norms in the imaginary self-favor and the other entities in Enron. The opponents of
the ethical egoism can claim though this is not possible for lamenting the past preferences as not
the helpful for self-interest such as loving the swimming happiness and not spending the vital
time to produce food and the mistakes are not the moral mistakes however the mistake of

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recognizing the self-interest (MACHAN, 2016). This type of creature will presumably begin in
comprehending the distinctions between the long term and short-term interest and the long-term
interests or gains can countered the short-term pains.
The ethical egoism is underneath the fire from the proper debt. In observing with the
ethical egoism, any single purpose at the greatest good of the Enron Corporation. By ignoring the
definition of goods in present, this can be argued, which pursues the great good may conflict the
other pursuit (Machan, 2015). In this, the conflict situation creates. The ethical egoism never has
the logical result in between the weak and strong in which, the strength determines the moral
rectitude for the values or the resources. The realist position can strike the philosophy improperly
as the psychological egoism though this is attractive popularly.
In the general act, depending on the roles to the general rules, the deontology theories are
of various types. The theories of deontology maintain that the fundamental judgments of the
obligation are specific one such as in such situation, the corporation needs to do so and the
general situation, it is needed to keep the promises made by the corporation (Filip et al., 2016).
In the extreme act, the deontologist maintains that they are able to see and decide the particular
situation separately. What is the obligatory thing for doing or what is the right thing without
appealing to the obligations and rules and without looking for seeing the promotion of the great
balance of the good in Enron over the evil for the world or any individual (Nwanji, 2016). The
deontologists supplement the non-consequential rules and obligation with the permission that is
non-consequentialist. This is the certain action, which may be right though this is not increasing
the good impact for the action rightness in the instantiating the specific norms.

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Part B: Use of AAA Model
The AAA model proposes the logical and the seven steps process for the decision making
that addresses the ethical issues. The AAA model initiates at the step 1 through developing the
facts in the provided case (Martinov-Bennie & Mladenovic, 2015). This initial step referes that
while the procedures of the decision-making starts, no ambiguity is there what is underneath the
cognition. To recognize the ethical issues in the certain case, step 2 is considered. It is included
with the examining facts of the certain case and asks what are the ethical issues are there at stake.
The values, norms and the principles, which are related to that case, are identified in the step 3.
In this step, keeping the decision in the ethical, social and some case with the context of the
professional behavior are involved. In the last context, the social belief of profession and the
professional codes of the ethics are taken for being the values, norms and the principles (Curtis et
al., 2017). Every alternative course of the actions is recognized in the fourth stage. This states the
each of the alternatives with the cognition of the values, norms and principles, which is
recognized in the step 3 for ensuring that every outcome of the alternatives is considered how the
result proper or improper might be. In the step five, the principles, values and norms are
recognized in the step 3 are covered in the alternatives reccognized in the step 4. When the action
is done, this needs to be possible for seeing which options are present in the norms that never
stops (Iphofen, 2016). In the step 6, the impacts or the consequences of the result of the actions
are considered and the aim of this model is to create the implication on the result in order to
make the final decision full of the recognition of the each alternative and knowledge. Eventually,
the decisions are taken in the step 7.
Step 1: “What are the facts of the case?”

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The facts was that in Enron Corporation, the shareholders of the corporation lost almost
74 billion dollar in four years, which leaded to bankruptcy and the staffs of the organization lost
their benefits of the pension (Edel Lemus, 2014).
Step 2: “What are the ethical issues in the case?”
Multiple ethical issues were there raised in the Enron Corporation. Some of them are
encouraging the employees for buying and investing the stock in the Enron Corporation while
they knew about the lack of the stock value (Dibra, 2016). They hid the losses of the business by
moving around the units of the business. The accountants and the executives of the Enron lied
about the company’s financial state by manipulating the earnings.
Step 3: “What are the norms, principles and values related to the case?”
The values, norms and principles of Enron are that the accountants and the executives are
assumed for having the impeccable integrity for assuring that the corporation is providing the
true financial state of the value of the organization by the shareholders in the capital market
(Edel Lemus, 2014). The accountants are entrusted with their tasks to assure the financial
accounts of the corporation and to prevent any failure of the duties of the accountants and
executives to the shareholders.
Step 4: “What are the alternative courses of action?”
Option 1 is that a more potential and complete system are required for the directors of the
corporation for supervising the operators, accountants and executives and then will be able to get
the knowledge and idea of the operating situation of the corporation.

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Option 2 is that a healthy corporation culture needs to be there in the organization. In this
case, the corporate culture played the vital role in the collapse.
Step 5: “What is the best course of action that is consistent with the norms, principles, and
values identified in Step 3?”
The best course of the action, which is compatible with the principles, values and norms
that recognized in the step 3 is the option 2, which is to create a healthy corporation culture in the
organization.
Step 6: “What are the consequences of each possible course of action?”
Under the option 1, the corporation would implement the potential and secure system for
supervising and monitoring all the financial state of the stock value, which will provide the idea
and knowledge of the operating situation of the corporation. More governance of the board can
keep the Enron Corporation from falling to the bankruptcy. The board of directions needs to pay
close attention on the management’s behavior the way they make money. Moreover, the fall of
Enron had the bad influence strikingly on the entire economy of the U.S (Markham, 2015).
Perhaps the U.S. government needs to make the better rules and regulation in their economy. In
addition, the ethics of the vital point of the people who are doing their own business needs to
focus on. As the manager and the loyal agent of the corporation’s staff have the duty for serving
the employer in the ways, in which, this will boost the self-interest of the employers.
Under the option 2, the corporation needs to create the healthy corporation culture, as this
is plays the vital role in the organization. The senior accountants and executives believed that the
Enron Corporation needed to be the best in every aspect and the corporation did and the board’s
shareholders were not involved in the scandal that was over the optimization about the operating

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conditions of Enron (Dempsey, 2015). While there are multiple existed losses and failures in the
performance of the organization, they were covering up the losses for protecting the reputation of
the corporation instead of trying for doing something for making this correct.
Step 7: What is the decision?”
The ethical decision of the case is Option 1. The corporation should implement the
potential and complete system to supervising and auditing the financial stock effectively.
Part C: Apply Ferrell, Fraedrich, and Ferrell model
According to Ferrell, Fraedrich, and Ferrell book, business ethics called as corporate
ethics is the form of the professional ethics or the applied ethics, which examines the moral and
ethical issues and values, which arise in the company environment (Ferrell, Fraedrich & Ferrell,
2015). This can be defined as the unwritten and written codes of the values and principles, which
is determined by the culture of the organization and it governs the action and decision of the
organization. This applies to all the relevant aspects of the conduct of the business of the entire
organization or any individual staff. Code of conduct is the other term, which is utilized in the
business extremely (Davies, 2016). This is the set of the regulations and rules, which are
considered as the bindings by the working people in the organization.
The ethics of business compromised with the principles and values and helped to guide
the organization’s behavior. The business needs to have the balance within the stakeholder’s
needs and their desire for making profit in the market. While maintaining the balances, the
business needs to do tradeoffs multiple times. For combating the scenarios, principles and rules
are formed in Enron Corporation (Sims & Brinkmann, 2003). It ensures that the business can
gain profit without affecting the society or any individual as the whole. The ethics that is

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involved in business of Enron reflects some of the philosophy of the corporation. The policies
determine the basic and fundamentals of the organization. The business has the ethical principles
and values frequently as outcome.
For the organization, business or any individual, ethics are the central concern. Behaving
in this way adds the values and norms without the negative consequences or the improper
conduct for the other organization or individual, the organizational leaders needs to be aware
completely of the impact of the organization trajectories or the particular decision and for
ensuring the alignment with the societal interests (Hoffman, Frederick & Schwartz, 2014). Ethics
in business is more than right thing in the organization. This is tied to the legal policies and
procedures many times that in case any breached occurred in the organization can put the
company in midst of the trouble.
The first step of the ethical decision-making is to identify that the ethical issues that
requires the group or individual work for choosing among the various action that the multiple
stakeholders outside or inside of the corporation will evaluate the wrong or right thing
ultimately. To decision maker, the ethical issue intensity relate to the perceived importance
(Pearson, 2017). Then the intensity of the ethical issues may be defined as importance or the
relevance of the ethical issues in the organization, work group or individual. This is temporal and
personal in the character for accommodating the perceptions, needs, beliefs, values and special
characteristics of certain situation and temporal or personal pressure prevails at the certain time
and place in this case.
The intensity of the ethical issues reflect ethical sensitivity of group or individual work,
which faces the decision making process in ethical way. The research done in the book written

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by Ferrell, Fraedrich, and Ferrell, proposed that the individual are subjected to the sex spheres of
the influence while confronting with the ethical choice such as the profession, legal system,
family, workplace, religion and community. The importance level of the every aspect of the
influences will be depending on how the vital decision makers are perceiving the issues for being
in account (Goel & Ramanathan, 2014). Moreover, the sense of the individual, in each moral
intensity of the situation maximizes the perceptiveness of the individual regarding the ethical
issues that minimizes the intention for acting unethically. The moral intensity refers to the
perception of the person of the social pressure. The step is set for the ethical conflict, unless the
people in the organization share the common concern regarding the issues. The perception of the
intensity of the ethical issues 9s influenced by the use of the corporate policies, punishments and
rewards and corporate values from the management to the sensitize employees. Multiple ethical
issues were there in the Enron Corporation, which cause the organization to bankruptcy such as
the partnership, which boosted the earning and permits the Enron Corporation in prospering
became misplace cards, which caused the Enron Corporation collapsing (Boddy, 2017). Though
the partnerships are classified as per the rules of FASB, Enron has the close ties with the
shareholders. This was the reason, the conflicts raised in the interest. The forced ranking
promotes the bad morale of the employees. There were multiple issues in the corporate culture in
Enron, which cause the organization to collapse.
Conclusion
By this study of the Enron, this can be concluded that, the cards of the Enron’s house had
collapsed as the result of the process of the interacting decision, this culture eroded at Enron
slowly by trespassing of the ethical boundaries and by allowing the most questionable behavior
for slipping by the cracks. The deterioration of the corporation never was unnoticed entirely. The

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employees and staffs of Enron Corporation, accountants, auditors and few analysts watched the
financial market of the stock and noticed the situation of the organization, which was not proper
situation before the society or the individual, became aware of the transgressions of the
corporation Enron.

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