Ethical Responsibilities of Corporations Enron’s Downfall

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19 November 2015

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Ethical Responsibilities of Corporations; Enron’s Downfall


       Enron, in the 1990’s was a premium company that had the much-coveted global stature that most company heads desire. It is considered the most innovative company in the United States of America. It was a change from the old industrial trend that other old and rusty enterprises and industries were used to; hard assets, in the favor of the much softer e-commerce business world. The company was a premium employer in the USA and the world, employing over 20,000 staff by the time of winding into bankruptcy, in 2001 (NPR). The company dealt in natural gas, electricity, pulp and paper and communication. A year before closure, the company was valued at $111 billion and had held the title-for six years running-of the most innovative company in America.

       However, this valuation respect was based on falsehood. The company was discovered to have been operating a scandalous accounting fraud, orchestrated by systematic, institutionalized and creativity. Ironically, as it was named the most innovative company, which might have been true, but not in the upright way that it was perceived to be. This was but in underhand deals that its employees and management had mastered. What culminated into the ‘Enron Scandal’ has since become a frequently referred to a case of willful corruption and corporate fraud.

       Companies and corporations, under the federal law, have a duty to their employees, consumers, the government and the environment in which they operate. To the government, corporations are supposed to ensure tax compliance and safety of production to citizens and environment. The firms and companies have a duty to protect their employees and provide safe work environment conditions for them so that all employees are always treated equitably and satisfactorily. Consumers have a right to accurate information regarding the products they purchase. The information is to provide at free will and is to guarantee consumer safety.

       In Line with that responsibility as stated in the paragraph above, Enron management failed to safeguard their employees’ future and livelihoods in case their bubble burst. At the time Enron went bankrupt, Thousands of employees it had in its baskets were plunged into joblessness suddenly. This scandal involved even top government officials who were then shareholders. In the light of them knowing that Enron engaged in malpractices-they still were happy to take home the hefty dividends they got from the stock market gains.The Times Magazine talks about the top executives who enjoyed lots of privileges that even top CEOs envied. For example, Kenneth Lay, the Former Enron Chairman is said to have received a golden parachute worth $25 million and about $200 million in salaries since 1999 to its point of fall. Despite all that, he also enjoyed the access to about $7.5 million revolving credit line from Enron (Roston, 2002). Others who enjoyed such benefits include Jeffrey Skilling (former C.E.O), Duncan David (Former Anderson Partner), Nancy Temple (Anderson Lawyer), Thomas White (Secretary of the Army), and Sherron Watkins ( Former Enron Vice President).The government through the law has set up different commissions to ensure that these obligations are duly followed (example of one is the Federal Trade Commission (FTC)). FTC is charged with taking complaints about false business promises that turn out fraudulent, or cause harmful side effects to the consumers and forwarding them to investigation agencies for further action (Federal Trade Commission, 2014).

       In the past, the things that brought down companies were far from cleverly crafted schemes such as what took place at Enron. The operation on the stock exchange while on a negative financial record and receiving probably more than their fair share of investments. Among other key ethical issues that had arisen in the past included racial profiling, product safety concerns, employee rights infringement and even environmental degradation. There have been lists each year of companies that should be shunned for disregard of ethics. For the past few years, companies such as ExxonMobil, Apple, Toyota, Trafigura, and recently Wal-Mart and Nestle had made headlines for breaking the crucial ethical rules.

       The Federal Employees’ Compensation Act (FECA), establishes mechanisms for compensation of employees who are injured, or get any damages in the line of duty (Office of the Secretary, 2014). In the case where an employee was hit by a truck and laid off without compensation, is very inhumane act of the company’s executives.

       The Fair Labor Standards Act (FLSA) is set to be the benchmark for equitable pay distribution to all American employees. It provides guidelines for employment and wages to be paid to employees who are not exempted from work. Conditions have been set for certain jobs and age restrictions. These labor laws, for example, require that particular groups of people not work at certain times, and in particular professions, citing dangerous operations (Office of the Secretary, 2014). If the labor laws are followed to the letter, no employee will complain about unsatisfactory pay, as the minimum wage is set with all employees in mind and ensures a comfortable life away from welfare.

       Kirk O. Hanson, a university professor at the University of Santa Clara, explains the ethical responsibilities of a corporate board. He lists five important points that are to be keenly upheld by any board of directors in order to ensure satisfaction from all quarters. Among other key assignments on a board, one of them is to understand the company’s ethical culture. Most board members are less involved with the day to day activities of their businesses, and to get feedback from employees, they rely on pro forma reports and complaint letters. It is their responsibility to investigate the validity of the reports and come up with disciplinary measures if need be (Hanson, 2014).

       Business fair play is an important aspect of ensuring healthy and profitable competition among business people.

       Such a supposition that they respect individual rights of association and expression and yet reject the idea of unionization is ridiculous. Under sections 7 and 8 of the National Labor Relations Act of the Federal constitution, employees are granted rights to make a join and take part in labor union activities. This is without any intimidation from employers, or punishments of any kind. All employees have a right to read, distribute and discuss matters of union membership during hours away from work. They are free to share the information with whomsoever they please. Once they decide on a group plan for whatever union, they have a right to ask their employer to recognize the specific union, bargain and complete any relevant requirements by the terms and condition. The employees have a right to display Union messages in whatsoever manner they please; be it caps, pins, T-shirts or whatever else available on the job or away from work.Company executives are not supposed to profile any employees by forcible transfer, denial of benefits, pay rise or desirable assignments in effort to thwart employees’ quest to join or form a union. They are not to be harassed, threatened or dismissed from work if they support any union (Lisa Guerin, 2014). All in all, we do need quick solutions to problems such as these. It is not just an issue for the employees alone because it affects all American citizens, and per the house committee on education report.

       General Electric, a company that was founded by Thomas Edison, has on many occasions received accused on several occasions of trying to monopolize the inventions by him. It is the current military contractor for war machinery. However, they have once been reported for facilitating the development of nuclear weapons. Nuclear weapons have long since been banned and are regulated by the international bodies. The purpose of such an undertaking should be investigated, and due punishment administered.

       The American public should check indicators of unethical codes of conduct and shun such businesses. It will be a significant boost in fighting such a vice as it will prevent oppression of fellow citizens. If people followed such a trend, companies such as this would lack a ready market and might be forced to change the practices or close shop.

       All firms that are established in corporate agreements uphold certain fundamental duties. In order to solve this massive crisis of ethics, law should be passed forcing private sectors to publish their financial reports in detail in the public dailies. The public should be trained to watch for companies that uphold employee rights and safety. These statements should be audited by government agencies for any lies. If the reports are found to be untrue, government should snatch such operators their licenses.

       Companies and corporations that evade taxation of any kind should be imposed with huge fines. In order to shun such practices, and in extension, be barred from operating for a particular period of time and board members is investigated. If any allegations of misconduct are proven right, all board members should be forced to resign and take responsibility for their ineptness. Enron was a culprit in this category, avoiding any financial obligation it would have to offset to the government or anyone, provided that it was able to cover its tracks well.

       On an opinion proposed from the Financial Times magazine, the graph of performance shows that the downfall was carefully planned. It seemed that most of the top echelons had long planned the exit, but it did not happen in the most expected way. The stock price came crashing in a year, from a cost of about $80 in January, the year 2001 to a tumbling zero by January in the year 2002.

       In the Film Enron: The Smartest Guys in the Room (Gibney, 2005), as based on the same name written by Bethany McLean, the Enron Disaster is the greatest disaster any company has witnessed in the whole of history. A crash in a year with more than seven corporate walking away from the mess with over 1 Billion US dollars. Investors and employees went down flat without any landing gear. This kind of corporate ethics gap left more Americans depending on the public for necessary handouts and relying on other meager means to survive. The Drama resembles a Greek tragedy and a show of the domino effect that could shape the face of the American ethical code and ultimately the economy for a long time into the future.Kenneth Lay, the company’s chief who had saved ib once before in the ‘80s and later taken over as C.E.O wielded so much influence In both the business and political circles. Probably out of the campaigns he had funded for the presidency among other legislative dockets. In the Business circles, he was an enviable C.E.O, who was practically “untouchable”. But in the wake of the ethical backlash, all these attributes could not save his company from sinking to the bottom of the sea that is failed companies.

       Ethics is more than just producing good products, supporting community initiatives and giving good salaries. Companies with a sound ethical background will go to extents to ensure consumer safety, business fair play and ensuring that employees who served diligently go home safe to retirement. Even after retiring, they will be entitled to the same happiness they had while working for the same company, and health.

       All corporations that breach conduct on ethics should be nationalized in order to safeguard the interests of the public. Its owners should then be duly compensated and never allowed to start any other business within the country. Such a law will instill fear and caution among those who have a penchant for breaking the law.

       Consumers and the government need to be careful about safeguarding the economic environments. Since any turmoil could lead to financial turmoil like it did with the instability of some few big companies in the early 2000s that lead to the 2007-2009 global financial crunch. The government can help by sealing off all loopholes that could allow any forms of corruption while the consumers could channel their money to the right businesses.

       If we all stopped buying brands that do not have its people at heart, all companies and many other manufacturers would forcefully comply duly with laws of labor, taxation, and biosafety. We will have a better world where many Americans and people around the world can eat by their sweat, as opposed to having jobs but still relying on welfare for upkeep.


Federal Trade Commission. (2014). Bureau of Consumer Protection. Retrieved December 06, 2014, from Federal Trade Commission:, A. (Director). (2005). Enron: The Smartest Guys in the Room [Motion Picture].

Hanson, K. O. (2014, August 14). Business Ethics in the News. Retrieved Dec 06, 2014, from Santa Clara University: Guerin, J. (2014). The Right to Unionize. Retrieved December 06, 2014, from NOLO For all: (n.d.). The Fall of Enron. Retrieved Feb 4, 2015, from of the Secretary. (2014). Summary of the Major Laws of the Department of Labor. Retrieved December 06, 2014, from United States Department of Labor:, E. (2002, Jan 22). The Enron Players. Time .

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