Exploring the Impact of Ethics in Business: Enron Case Study

School: Eastern New Mexico University - Course: ACCT 2110 - Subject: Accounting

Reed Carter 04/03/2023 ACCT_2110 Writing Assignment Two Ethics refers to the moral principles and values that guide the behavior and decisions of individuals and organizations. In the context of business, ethics are the principles and values that guide the behavior of organizations in relation to their stakeholders, including customers, employees, shareholders, suppliers, and society. Ethics in business is important because it helps organizations to build trust, reputation, and social capital, which are critical for long-term success. The importance of ethics in business can be seen in a few different ways such as trust and reputation. Business ethics plays a crucial role in building trust and reputation. When an organization conducts its business in an ethical manner, it demonstrates to its stakeholders that it is trustworthy and reliable. This, in turn, builds the organization's reputation, which can help attract and retain customers, employees, and investors. Growing up I was always told that morals were the most important thing you have and no one can take that from you. My dad would always tell me that your morals make you who you are and what you believe in. In a business environment morals affect a lot of things such as trust and reputation, compliance and legal requirements, employee engagement and retention, customer loyalty and satisfaction, and social responsibility. Enron was an energy company that collapsed in 2001 due to fraudulent accounting practices and ethical misconduct by its top executives. Enron had a published Code of Ethics that outlined the company's commitment to ethical behavior, but the behavior of its executives was in stark contrast to these principles. The Enron executives engaged in a variety of unethical

behaviors, including creating special purpose entities to hide debt, inflating earnings, and engaging in insider trading. These actions were all in violation of the company's Code of Ethics, which stated that Enron would conduct its business with honesty, integrity, and transparency. One key difference between the Enron executives' behavior and the Code of Ethics was their focus on short-term financial gain at the expense of long-term sustainability. The Code of Ethics emphasized the importance of creating value for all stakeholders, including customers, employees, and shareholders, but the executives were primarily focused on maximizing profits for themselves and their investors. Another contrast was the lack of accountability and transparency in the executives' actions. The Code of Ethics emphasized the importance of accountability and transparency in all business dealings, but the executives engaged in secret transactions and failed to disclose the true financial state of the company to investors and employees. In summary, while Enron had a published Code of Ethics that emphasized the importance of ethical behavior, the executives' actions were in stark contrast to these principles. The executives prioritized short-term financial gain over long-term sustainability and failed to uphold the principles of transparency and accountability outlined in the Code of Ethics.