Tag: Ethics

ENRON SCANDAL : VOILATION OF BUSINESS ETHICS

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.

Moral Philosophy and Ethical Theories

Moral Philosophy is a branch of philosophy that contemplates what is right and wrong. It explores the nature of morality and examines how people should live their lives.

Ethics are the moral principles that govern a person’s behaviour or the conduct of an activity. Morals are concerned with principles of right and wrong behaviour and the goodness and badness of human character. Morality governs private, personal interactions while Ethics governs professional interactions. Ethics and morals relate to right and wrong conduct and are often taught to be the same however they are different.

Ethics refer to rules provided by an external source e.g., codes of conduct in workplaces or principles in religions while Morals refer to an individual ‘s own principles regarding right and wrong. Many morals are common as they stem from basic human emotions.

There are 3 Branches of Moral Philosophy

  1. Meta-ethics

This Branch asks the big picture question such as “What is Morality?” “What is Justice?” “Is there Truth?”

  • Normative Ethics

This branch answers questions of what we ought to do. It provides a framework for deciding what is right and wrong. There are 3 common frameworks;

Consequentialism (Utilitarianism)

Deontology

Virtue Ethics

  • Applied Ethics

This branch addresses specific, practical issues of Moral Philosophy such as war and capital punishment. It also tackles specific moral challenges that people face daily, such as whether they should lie to help a friend or coworker.

The Focus of this article is on the Normative Branch of Moral Philosophy

  1. Consequentialism is an ethical theory that judges whether or not something is right by what its consequences are. For instance, most people would agree that lying is wrong. But if telling a lie would help save a person’s life, consequentialism says it’s the right thing to do.
  • Deontology is duty ethics, so it compares a person’s ethics against some duty or imperative. Deontology emphasizes the character of actions.
  • Divine Command Theory

In this Theory, the action performed is in accordance to the order or decree given by God.

e.g., Sabbath

Virtue Ethics

Virtue Ethics is a philosophy developed by Aristotle and other ancient Greeks. It is the quest to understand and live a life of moral character.

This character-based approach to morality assumes that we acquire virtue through practice. By practicing being honest, brave, just, generous and so on, a person develops an honorable and moral character.

According to Aristotle, by honing virtuous habits, people will likely make the right choice when faced with ethical challenges.

Aristotle and The Highest Good

In book one of Aristotle’s Nicomachean Ethics, he claims every action is aimed at some good yet these aims vary between individual and context. 

According to Aristotle the highest good must fit into three criteria:

  • it is desirable for itself
  • it is not desirable for the sake of some other good
  • all other goods are desirable for its sake.

Furthermore, Aristotle later includes that the highest good must be acted upon because if one does not act to achieve any aim then they will never achieve it. In other words, the highest good is a solitary nucleus, which all other goods are acted upon for.

For Aristotle this highest good is happiness or eudaimonia (which translates to living well). He argues this by going through the list of what many may consider the highest good of actions; for example, pursuing wealth, honor, or wisdom. Yet, these do not fit the criteria he is trying to fill. Instead, he examines all these aims and realizes happiness is the highest good because it is what living well consists in and the latter aims are sought because they promote living well, not because they are what living well consists in.

Eudaimonia vs Euphoria

Euphoria can be described as the short spike of happiness that we feel during certain moments while the lasting happiness is called eudaimonia.

Eudaimonia is a more balanced approach where the happiness does not rely on isolated, powerful events but yields from every day events. Little things like conversations, encounters with people, a walk in a park, hearing a bird sing, a train being on time, a drink in a pub, a beautiful sunset. It is a mental attitude to appreciate little things and creates a robust and content state mind.