Ethics and Governance: Ethical Theories, Models, and Enron Analysis

This report delves into the contrasting views of ethical theories, specifically focusing on deontology and egoism, while differentiating them with a case study. It also examines the American Accounting Association (AAA) model to understand ethical decision-making and behavior, relating it to the Enron...Read More

Running head: ETHICS AND GOVERNANCE
ETHICS AND GOVERNANCE
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Executive Summary
This paper aims to provide with the contrasting views relating to the ethical theories of
Deontology and egoism. It also provides a case study known as Enron Ethics and such is
considered to be related to the theories.
It also aims to provide a brief idea about the AAA model which is considered to
understand the ethical decision making and the ethical conduct of an individual with regards to
the above-mentioned case study. It also aims to discuss the ethical decision-making model made
by Ferrell and Fraedrich and tries to relate it to the above-mentioned case study. In conclusion, it
aims to provide a brief summary relating to the points that have been discussed in the paper.

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Table of Contents
Introduction......................................................................................................................................3
Part A...............................................................................................................................................3
Part B...............................................................................................................................................5
Part C...............................................................................................................................................8
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

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Introduction
This paper is considered to provide a brief idea about the concept of the ethical theories
relating to egoism and deontology and provide contrasting views and differentiating the theories
in relation to a case study. It also provides with a brief understanding about the AAA Model in
accounting and the steps which are used in the model to determine the ethical characteristic or
behavior. It also provides with the Ferrell as well as the Fraedrich model relating to ethical
decision-making which are in relation to the Enron Ethics Case Study. In conclusion, it
summarizes the points that have been dealt with in the paper.
Part A
Egoism is considered to be a theory which states that the individual needs to be motivated
of their own goal and action. This theory has its own variants, which are considered to be
normative and descriptive. The normative variant suggests and offers that the individuals should
be encouraged and motivated irrespective of what currently encourages and motivates their
behavior. On the other hand, descriptive variant is considered to be conceived and apprehended
as a factual description of several human affairs for egoism. For instance, the individuals are
considered to be motivated and encouraged through the interests as well as the desires of
themselves which cannot be explained or described. Altruism is considered to be the opposite of
the egoism. This term is derived from the word ego, which is considered to be the Latin term for
I or oneself in English. There is a difference between egotism and egoism, which can be defined
as a psychological overvaluation of an individual’s own importance or significance, which is
based on their own activities. The individuals are considered to act for various reasons and they
care about their own interests without any kind of regards or consideration for other people’s

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interests. These are also considered to depend on the account relating to free will. There have
been various arguments relating to the choice of the matters that the individuals or the people
have which makes the people or the individual acts be determined through prior events which
would make it illusory of any belief pertaining to the choice. However, if there has been an
element relating to the choice provided to the individuals then the individual for the action
relating to the choice would possess a certain kind of control (Machan, 2015).
In comparison to such the word deontology is considered to be derived from the Greek
words which states for duty and science. According to the modern philosophy deontology is
considered to be one of the kinds of theories which are normative in nature where the choices are
considered to be required morally or they are forbidden or allowed. Through other words, it has
also been understood that deontology is considered to fall within the area or domain of the
various moral theories, which would guide and also evaluate the choices taken by the individuals
which are supposed to be done. In contrast to such, the guide is considered to evaluate and asses
the moral theories and the choices. It is understood as duty obligation or rule based ethics. These
theories are considered to be contradicted through consequentialism, pragmatic ethics as well as
virtue ethics. Depending on such the deontological ethics are considered to be under
consideration, which is a moral obligation that might arise from any source, which would be
internal as well as external. These rules are inherent to the universe. In this theory the action is
considered to be morally good which would be for some characteristic for the action itself and
not for the product of the specific action being good (Vadastreanu, Maier & Maier, 2015).
Therefore, it can be understood that the theories of deontology along with the theory of
egoism are different as one deals with moral action, which would determine whether such is
correct, or whether such is forbidden and on the other hand the theory of egoism discusses the

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motivation through oneself which would be based on their own goals and actions. The theory of
deontology would be more applicable in the Enron case.
Part B
The American Accounting Association model is considered to provide a framework,
which would help in the ethical decision-making. There are seven questions, which have been
asked in the model, and these are considered to include:
 Establish the facts of the case: This step is considered to define the time when the
decision-making would start. In this step there are no ambiguities relating to the things
which are taken into consideration.
 Secondly the ethical issues in the case are considered to be identified: This particular step
includes the evaluation or the assessment of the facts which are in connection to the case
and the ethical issues that are considered to be at stake.
 The third step involves the identification of the various norms, principles and values,
which are in connection to the case: These are considered to include the placing of the
decision through the context of ethical, social and professional behavior. In the last
context, the professional code of ethics or the various social expectations of that of the
profession are considered to be taken as the norms or the principles along with values.
For instance, if the rules of the stock market were considered to be involved in the
decision then for such these would be considered to be a relevant factor which needs to
be considered in the step.
 Identification of each alternative course of action: This particular step is considered to
involve the statement of the norms as well as the principles and the values without any
kind of consideration, which have been identified or discovered in Step three. These

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would be to ensure the outcome or the result would be considered irrespective of the
appropriateness or the inappropriateness of such outcome or the result.
 The norms, values and the principles would be matched to the options: This specific step
is considered to identify the norms, values and principles which are prevailing in step
three and these are to overlaid or covered by the options which have been identified in the
step four. After such process is considered to be complete there would be a possibility to
see and understand which options are in harmony with the norms and which are not in
accordance with such.
 The consequences for the outcomes are considered: In this specific step the objective or
purpose of the model is considered to make certain implications for each of the outcomes
that had been taken into account or consideration which would be unambiguous so that
the decision which is considered to be final would be made in full knowledge along with
recognition of each one.
 This final step is considered to be the step where the decision has been taken (Martinov-
Bennie, & Mladenovic, 2015).
There are several stages to the ethical decision-making which involves a four stage process.
These are considered to be influenced by the situational factors and in addition to such the
individuals. It is considered to be applicable to the theory of Kohlberg’s CMD which are in terms
of the business decision making. The four stages are considered to be the recognition of the
moral issue. After recognizing the moral issue, the moral judgment needs to be made. Following
such the moral intention needs to be established. Lastly, the individual needs to be able to engage
in activities, which would be in relation to the depiction of the moral behavior.

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This particular model is considered to distinguish and differentiate between knowing the
correct thing, which needs to be done or in other words recognizing the moral issue and along
with such the moral behavior for recognition of such moral issue. Whether there has been any
kind of action taken or implemented after identifying and recognizing the moral issue.
There are several factors, which are considered to influence the moral decision. The moral
decisions, which are considered to be taken, would be consisting of the individual factors where
the characteristics of the individual would be unique and different and the decision would be
similar to the age, gender as well as experience which would be obtained during the course of
life. The factors which are considered to be situational would be specific factors which take place
in the decision area which would cause any individual to make some kind of ethical or unethical
decision. The individual factors are considered to be primary for any kind of higher-level
decisions. The decision maker is considered to make ethical decisions because they are of the
opinion themselves that such would be considered to be in the correct course of action. The
situational factors are considered to be more suitable for the lower-level decisions. The decision-
maker in this particular situation makes the decisions which are based on the expectations of the
actions which are considered to be estimated or anticipated of them regardless of the values or
the beliefs of the individuals (Pergola, & Walters, 2017).
The accountants are considered to be normally expected to behave in way which would be
ethical. Nevertheless, such kind of behavior is considered to be dependent on the nature of the
issues which are ethical or the factors which are considered to be issue related. Along with such
it also needs to be in context in which such an issue is considered to occur or take place or in
other words the factors, which would be context, related. In case of the issue related factors the
moral issues are considered to be discussed in the workplace. Therefore, if there has been any

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kind of dilemma such can be made to appear inoffensive in a certain way. In the context related
factor if any behaviors are considered to be encouraged or rewarded in spite of being dubious
ethically then for such the decision-making would be affected. Therefore, these are considered to
be important factors which needs to be understood as such determines the ethical behavior or the
ethical decision-making of the individual.
In the Enron Case the AAA model would be used which would help in determining the
ethical decision-making through the seven steps and then such would be comprehended on the
basis of that. In the particular case the problem or the difficulty was that, the accounting firms
were considered to be guilty of fraud. Therefore, the ethical decision-making would be decided
and determined through the steps and the factors, which are associated with the ethical decision-
making process.
Part C
The era or the period of the 1980s were considered to experience an essential and
significant contribution regarding the field of the ethical decision by observing and perceiving
the development or the progress of some of the most popular decision-making models. The
marketing field was also not considered to be an exception as there would be a wide range of
work which were existing and such was in relation to the business ethics. Nevertheless, the
majority of the workplace were considered to be done through this specific field and it would be
through this field that the aspect of the purchaser and the seller had been focused on. The ethics
were considered to be perceived from the consumers’ perspective. The consumers were
considered to be an essential part of the whole processes of the business. If there, had been any
kind of failure relating to the comprehension of the ethical beliefs of the consumers then such
would mean that there had been incomplete information provided relating to their purchases or

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any usage along with the disposition of the goods. Therefore, in order to provide with better
ethical decision-making models the theorists had come up with several models in order to define
such in a comprehensible manner.
The domain of the various rational models have been brought together through the
studying of non-rational or non-cognitive perspectives relating to the role of the self conscious
emotions and the technique which would be relating to neutralization. The study of ethics is
considered to be on the basis of morality which are considered to provide with certain insights
into that of the morality of an individual and the criteria which would help in establishing the
good and the bad or right from the wrong. It would also be based on the philosophical reflection
and the beliefs. The ethical decision-making is considered to be one that is considered to be
morally as well as legally correct in nature which would be determined by a larger community.
In the case or in the instance of consumer behavior the right as well as the wrong would be
determined on the basis of the buying and the intention of buying any product which would also
help the consumers to abide by any kind of societal norms. These are also known as the social
consumers.
The Ferrell and Fraedrich Model is considered to present five stage of descriptive as well
as ethical decision-making model. The first stage is considered to be of the ethical issue which is
also connected or associated with that of the awareness stage. This is followed subsequently by
the cognition stage, the moral evaluation stage, the determination stage and the action or the
behavioral stage. The external variables are considered to be derived from the macro-
environment which are also considered to be the social along with the economic factors. On the
other hand, the external factors are considered to be derived from the micro-environment which

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are the organizational culture or the opportunity along with the individual moderators (Wittmer,
2016).
In the Enron Ethics case study, the 2002 Sarbanes-Oxley Act was considered to be passed
in the United States in response to numerous amounts of scandals relating to the corporate
accounting, which included corruption as well as fraud, and such was considered to be on a
colossal or enormous scale. There was also a collapse of Arthur Anderson which was considered
to be one of the Big Five accounting firms formerly and such was found guilty of committing
crimes which was in relation to the firm’s auditing of the Enron. These cases are considered to be
emphasizing or accentuating the significance of the ethical conduct in the work place. Therefore,
this case helps in determining the essentiality of the ethical behavior as well as ethical conduct
and decision-making in the workplace. The Ferrell and Fraedrich model is considered to be an
ethical decision-making model which helps in determining the ethical behavior and helps in
differentiating from the right to the wrong. Therefore, the five stages which have been discussed
above can be used in the case study to figure out what went wrong with this particular case
study. The first one is considered to be the awareness action whereby it can be understood that
the company needed to be aware of its financial position and therefore, based on such awareness
should have carried out ethical works which would have helped the company to grow. The
individual factor would be consisting of the fact that in order to remain within the top most
position the company had committed certain offences which had ruined the reputation of the
company and thereby caused a dent in the reputation of the individual sector. The company
lastly, got the opportunity of being a part of such scandal by taking part or participating in the
crimes relating to fraud. Therefore, such was considered to be wrong and unethical. It was
considered to be immoral. The company did not have the capacity to differentiate between the

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right from the wrong thus, the company was considered to be able to grab the opportunity
without knowing whether it was an ethical-decision making process or not. Therefore, in order to
carry out the functions in a company the individuals working in the company needs to be aware
of the ethical conduct as well as the ethical decision-making process. There are various factors
relating to such and there have been various models, which have been made pertaining to such,
and it needs to be understood. Hence, in order to distinguish the right from the wrong the ethical
theories as well as the ethical decision-making process needs to be understood as it would help in
creating a workplace, which would follow the rules of ethical conduct, and it would help the
workplace and the work ethics stronger.
Conclusion
Therefore, it can be understood from the above discussion that, the ethical decision-
making processes are considered to be taken into consideration as it helps in distinguishing and
differentiating the several moral behaviors from certain behaviors which are wrong. One such
example which has been used is the Enron Ethics case study which is considered to be a practical
example for the importance and significance of ethical decision-making.

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References
Machan, T. R. (2015). Egoism, Psychological Egoism, and Ethical Egoism. Wiley Encyclopedia
of Management, 1-4.
Martinov-Bennie, N., & Mladenovic, R. (2015). Investigation of the impact of an ethical
framework and an integrated ethics education on accounting students’ ethical sensitivity
and judgment. Journal of Business Ethics, 127(1), 189-203.
Pergola, T. M., & Walters, L. M. (2017). Ethics in the Accounting Curriculum: A Model for an
Enhanced Accounting Ethics Course. Journal of Business Ethics Education, 14, 199-228.
Sarbanes-Oxley Act 2002.
Vadastreanu, A. M., Maier, D., & Maier, A. (2015). Is the success possible in compliance with
ethics and deontology in business?. Procedia Economics and Finance, 26, 1068-1073.
Wittmer, D. P. (2016). Developing a behavioral model for ethical decision making in
organizations: Conceptual and empirical research. In Ethics in public management (pp.
57-77). Routledge.