Business ethics is the study of appropriate business policies and practices regarding potentially controversial subjects including corporate governance, insider trading, bribery, discrimination, corporate social responsibility, and fiduciary responsibilities. The law often guides business ethics, but at other times business ethics provide a basic guideline that businesses can choose to follow to gain public approval.
ENRON corporation was an American energy commodities & service company based in Houston , Texas . It was a merger between Houston natural gas & inter north . Founder of ENRON was Jeffrey Skilling & Kenneth Lay . Earlier they used historical cost accounting method , A historical cost is a measure of value used in accounting in which the value of an asset on the balance sheet is recorded at its original cost when acquired by the company. But in 1992 , this company started using Mark to market method , Mark to market (MTM) is a method of measuring the fair value of accounts that can fluctuate over time, such as assets and liabilities. Mark to market aims to provide a realistic appraisal of an institution’s or company’s current financial situation based on current market conditions , with the help of this method only they did the whole scandal . The fraud was , they took loan from banks & other corporations , but didn’t show them in their books of accounts . They bought a MEDIATIOR , SFS ( special purpose vehicles ). They sold their assets to SFS & in return SFS asked loan from the banks . But they didn’t showed that they sold their assets in their books of accounts . They took loans , raised their capital & did the fraud of billion dollars .The value of shares of ENRON raised from 20$ to 90$ . The whole scandal was they hide the losses , showed fake revenues & profits , used complex accounting methods & did unethical things with the books of accounts by manipulating them .
But in 2001 , scandal burst , ENRON suffered a loss of 618 billion $ . Company did the scandal of 70 billion $ . Many investors , general public & employees suffered huge losses . Company’s one time Chief Jeffrey Shilling was sentenced to 24 to 24 years in prison in 2011 . Business ethics enhances the law by outlining acceptable behaviors beyond government control. Corporations establish business ethics to promote integrity among their employees and gain trust from key stakeholders, such as investors and consumers.
Amidst growing scrutiny of business practices, it’s more important than ever for companies to carry out work the right way. Ethics programs are an exceptional tool for promoting moral conduct. Organizations also need employees dedicated to ethical decision-making.