Ethics

The tagline of this article, From workers homes to halls of government is beautifully written and succinctly captures the case of Enron. The failure, rather collapse of Enron is said to be one of the biggest business downturns in the United States of America  it went one from extreme of prestige and profits to the other extreme of bankruptcy and insult.

One of the most important stakeholders of Enron is the customers of it  people who were buying their shares. Due to its tremendous reputation, people put their trust into it and bought so many shares that it could cause them a fortune. Naturally, with so many people putting in their trust in a company and buying shares resulted in the peak of Enron where is was worth more than some companies could imagine. However, that trust costed them more than they had imagined  the company was involved in a big internal fraud.

For any company, another very important stakeholder is their employees. The employees are who make up the company without them to company cannot function. The employees should be explained their tasks well and most importantly, they should be told about the impact their work will cause  whether it is good or bad. Then it should be up to them if they wish to or do not wish to do it. In Enrons case, not all the employees were told exactly what was happening and that all the internal books were incorrectly updated- only a few of them were involved. Therefore, the case of ethics can only be valid for those who were aware only they can be considered unethical because ideally, they should have reported to the legal authorities about this fraud. The entire employee force cannot be termed unethical, because those who did not know and would have reported had they known are innocent and should not be penalized.

Third most important stakeholders are the external parties involved in business with the companies  these could be the suppliers, B2B buyers and even auditors. In Enrons case, the auditors could have played the biggest role in revealing the truth. However, it is said that they conveniently neglected it, but I believe they were involved in this fraud and so did not take any action against the company. Thus, it is purely unethical of them too.

Ethical Analysis
According to the ethics of business and the contract view of ethics claims that the contract is ethical only if it is free of four things misrepresentation, coercion, incompliance and lack of disclosure of information. When a stakeholder buys a companys shares, it becomes a contract also, the contract and the buying of shares is based on the information the company discloses (Enderle, 1999). In the case of Enron

The duty not to misrepresent  this means that the information of the product should not be played around with (Velasquez, 2006). The right information should be shared with the stakeholders so that whatever they do is based on it and not in the dark. Here, the information told to the customers about the value of the company, upon which the share buyers base their decision of purchase, was untrue. Their accounting books were a big mess. They had misrepresented their profits and equity values this means that the worth of the company was actually not what it was projecting it to be. This misrepresentation was not of a small amount, but of a couple of billion dollars, which is a huge amount. This is not only illegal and worthy of years of jail and the snatching away of the license of the company, but also unethical. Naturally, when it was presented to be of a greater value, the customers put their trust into it (the higher the value of the company means greater returns and consequentially, greater trust from the shareholders). However, had they known the actual value of the firm, there is a high likelihood that their decision would have been very different. In this case, the auditors were also responsible for lack of disclosure of the inaccuracy of accounting bookkeeping.
The duty of disclosure  according to the contract, it is the duty of the firm to reveal and inform the stakeholders of every aspect of that product especially, the negative aspects. That is, if there is something that would make them not want to be associated with the company should not be kept a secret and should be told. If not, it is unfair on the stakeholders because they are being deceived.
It was also unethical of Enron to fire so many of its employees without any prior notice and without any monetary compensation (Albertson, 2007). The employees were not responsible for this and despite that all of a sudden their income stopped. Enron really should have looked into compensation as it is also against labor regulations.

Cost and benefits
More than benefits, which were short term, Enron had to face long term costs. The costs were the collapse of the company so bad that there was no way that the company could get back on its feet ever again. Even if it did, it would not have any investors or share buyers because with this episode, the share buyers have all lost trust in Enron and its people. Biggest con is the fact that there will no license and the owners will be jailed along with huge monetary fines. The cost has to be borne by the entire economy and stock market because this was such a huge debacle that it impacted all the investments and the entire economy.

Benefits for the company are minimal, but it was good for the innocent employees to get out of it before the scandal got any bigger. Also, the regulations of America will now be stricter and the regulative authorities will be more alert of such frauds, along with more cautious investors and share buyers.