Ethical Theories Applied to Enron

In: Business and Management

Submitted By rfoose
Words 1705
Pages 7
Prescriptive Approaches to Ethics at Enron Enron was a global energy firm that filed for bankruptcy protection in 2001. The firm’s senior managers had engaged in fraud for an extended period through a scheme in which partnerships owned by the managers could receive payment for goods and services never provided to Enron. In addition, the firm’s external auditing firm, Arthur Andersen, was complicit in the fraud by knowingly certifying false financial statements as accurate. Arthur Anderson participated in the fraud because the firm did not want to risk losing lucrative consulting contracts from Enron, which created a conflict of interest situation (Miller, 2004). The events leading to the collapse of Enron can be analyzed using the ethical frameworks suggested by consequentialist theory, deontological theory, and virtue ethics. Such an analysis can provide an explanation of the failure of Enron’s directors, mangers, and auditors to adhere to their ethical duties to the shareholders, employees, customers and suppliers of the firm. Consequentialist theory suggests that an act is ethically wrong if it results in consequences deemed wrong or harmful by the majority of people in a society (Hooker, 2002). The consequentialist theory requires assessing the actual consequences of the act, which includes both direct and indirect consequences. It also requires using some type of evaluative norm for determining whether the consequence is beneficial or harmful. The theory is prescriptive because the evaluative norms are used to guide whether individuals should perform or avoid an act. To apply the theory, there must be general agreement in a society as to the nature of the evaluative norms. The theory also suggests that the ethics of each situation should be determined according to the specific circumstances without reference to an absolute legalistic or moralistic standard.…...

Similar Documents

Ethical Theories

...Nine theories of ethics that rule the world 1. Consequentialism maintains that the majority of an action depends on the nonmoral consequences that the action brings about. Morality of an action consists of the ratio of good to evil that the action produces. We should perform right and only right action in terms of good and evil, as each individual defines good and evil, and right and wrong. There is no objective right and wrong or good and evil. The person defines these. You bump into a car at the mall. You could leave a note, but since there were no witnesses and the owner is not around, you decide not to because you recognize that the damage is low (probably only a couple of hundred dollars). The car owner probably has insurance, and it would be such a hassle for the owner to contact you and your insurance company. You may have to end up paying higher premium, the owner may think ill of you—all of which are nonmoral reasons that may be unpleasant for you. Ethical egoism state that you should always act so that your actions produce what is in your own best long-term interests. Personal egoism states that an individual should always act in his or her own best long-term interests, but that does not say how others should act. Impersonal egoism states that an individual should always act in his or her own best long-term interest. 2. Values Clarification (Philosophical Relativism) teaches that the most important aspect is not what one believes, but being aware......

Words: 1547 - Pages: 7

Ethical Theories

...Ethical Theories In today’s society, especially in business the question of what is ethical is a dilemma that a great deal of individuals is faced with every day. Ethics vary from person to person and culture to culture. What is unethical in the United States of America may be completely ethical in China. Dictionary.com defines ethics as the moral principles that govern a person’s or a group’s behavior. There are many different theories of ethics, and which one a person chooses to live by, depends on which theorist the individual believes to be more in line with their own personal moral beliefs. When business ethics is discussed it is hard to speak about it without mentioning the name of Milton Friedman. Milton Friedman was an economist that theorized business ethics as monetarism. He is essentially responsible for promoting the economic growth of a company and the benefits to their shareholders. The primary goal and motivating force in business is to make a profit, and try to maintain efficiency while making a profit. Friedman’s theory is in correlation with the philosophy of corporate law. In corporate law the shareholders own the company, and they vote on the Board of Directors. The greatest duty is owed to the shareholders as owners of the business. Typically the Board of Directors makes the important decisions because they ensure the company is running efficiency while making a profit at the same time. Making a profit is the primary reason any company is in......

Words: 3336 - Pages: 14

Ethical Theories

...RUNNING HEAD: Ethical Theories Ethical Theories and Practices Antoinette McIntosh ETH/316 September 24, 2012 University of Phoenix There are different types of ethical theories. Ethical theories help to find how a person should act towards another or in a situation. The various types of ethical theories helps people define what is right and what is wrong and how we make those assumptions. Although the three main theories of ethics have the same purpose they are different from one another. The virtue theory is the ethical theory also called character ethics is based on the moral of what is ethical. It is based on personal belief and feeling of character. It “describes the character of a moral agent as a driving force for ethical behavior, rather than rules (Wikipedia, 2012). Virtue ethics is character based and focuses on helping people develop a better character trait. According to the text (2009), virtue ethics “take the viewpoint that in living your life you should try to cultivate excellence in all that you do and all that others do. These excellences or virtues are both moral and non-moral.” It deals with the moral character of a person rather than what is the more ethical thing to do or what society expects from them. Utilitarianism states that something is morally right if it is for the greater good of all. It is most often used in the United States government because of the principle of......

Words: 667 - Pages: 3

Ethical Theories

...Ethical Theories Everyday people are faced with decisions that are made using ethical and moral values. There are various ethical theories that philosophers have proposed throughout the last two millennia and I will discuss one theory that I feel is closest to how I make my decisions of right and wrong. Some people use the words of the Bible to make those decisions while some use rationing and reasoning. Whichever ethical theory one uses, they are still making ethical decisions to determine right from wrong. The Kantianism Theory is based on the theories of German philosopher Immanuel Kant (1724 – 1804). Many of the moral laws that Kant speaks of can be found within the Bible but also allows the laws to be derived through the process of reasoning. Meaning that one that follows the Kantianism Theory can explain why an action is right or wrong instead of simply stating it is wrong because it is written within a chapter and verse. Kant believed that moral universal laws should guide people’s actions. For instance, if a friend is wearing an outfit that you believe is not appropriate and they ask your opinion of such outfit, you should tell them the truth because telling the truth is the right thing to do, regardless if the outcome is not what the friend wants to hear. He also believed that people should treat one another as an end and never as a means to an end. For instance, if I go to an interview with the intention of being employed by that company for a short......

Words: 861 - Pages: 4

An Ethical Theory Applied to Business Organizations

...An Ethical Theory Applied to Business Organizations The object of this essay is to establish whether there is an ethical theory that can be successfully applied to business organizations. In order to answer this question, it is necessary first to define the major ethical theories, which are utilitarianism, deontology and virtue ethics, before determining whether there are any other options. After that, the ethical needs, problems and limitations of work organizations will have to be examined so that the different theories can be evaluated in this context. It will also be important to draw a distinction between the terms “accurate” and “useful” as these actually result in two different questions the answer to which need not necessarily be the same. Another essential part of this discussion is the more general question why there should be ethics in work organizations in the first place, and to what extent ethical behavior is feasible in the business world. Hopefully this will provide a framework within which the answer to the essay question can be included.  To begin with, the “traditional” approaches to solving moral problems will be defined, namely those of act-utilitarianism and deontology. These are traditional not because they have existed longer than virtue ethics, but because for a long time they have been the approaches most commonly used as a basis for trying to solve ethical problems. After looking at these two moral theories, the approach of virtue ethics regarding...

Words: 2850 - Pages: 12

Ethical Theory

...University of Phoenix Material Student Name: ___ Facilitator: __ Ethical Theory Comparison of Ethical Theories Utilitarianism Ethics Deontological Ethics Virtue Ethics Definition “Utilitarianism is an ethical theory that holds that an action is right if it produces, or if it tends to produce, the greatest amount of good for the greatest number of people affected by the action. Otherwise the action is wrong. According to utilitarianism, we should evaluate an action by looking at its consequences, weighing the good effects against the bad effects on all the people affected by it. If the good outweighs the bad, it tends to be a good action; if the bad outweighs the good, it tends to be a bad action” (DeGeorge, R. T. (2005). “The deontological approach to ethics denies the utilitarian claim that morality of an action depends on its consequences. Deontologists maintain that actions are morally right or wrong independent of their consequences. Moral rightness and wrongness are basic and ultimate moral terms. The deontological approach is not dependent on good and the production of, or the failure to produce, good. A person’s duty is to do what is morally right and to avoid what is morally wrong, regardless of the consequences. “Virtue ethics is currently one of three major approaches in normative ethics. It may, initially, be identified as the one that emphasizes the virtues, or moral character, in contrast to the approach which emphasizes duties...

Words: 993 - Pages: 4

Ethical Theories

...Ethical Theories Ethical theories can be best described as someone’s viewpoint on how you should base a decision. When I was young, decisions were made for me based on someone else’s beliefs of right and wrong. As I grew older and was still under my parents ruling, my decisions were influenced by family, their religion and society. Living on my own I started to base my decisions on my own life experiences, including my twenty years in the military. My thoughts and decisions are always changing in order to fit the situation. In order to try and understand the reasons why decisions are made, the ethical principles behind them must be explained. For that we need to start at the very basic, what is ethics? According to the article, “What is Ethics?” ethics refers to well-founded standards of right and wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues. (2010,p6) Ethical principles are those standards of conduct which defines our behaviors. They are what drives our decisions and beliefs. They formulate in which ethical theory we fall the most under. According to “Business Ethics and Leadership”, there are 12 principles in relation to ethics. Honesty, integrity, promise-keeping, loyalty, fairness, caring-concern for others, respect for others, law abiding, commitment to excellence, leadership, reputation and morale, and accountability. (Josephson, 2010) Although these may be the principles, I......

Words: 653 - Pages: 3

Ethical Theories

... Ethics Task 1 Ethical Theories For the task at hand we are to identify and describe the theories of Ethical and Psychological Egoism. First let us look at Ethical egoism, this theory is based on the idea that each individual should do what is entirely in his or her self-interest. A description of this type of egoism is, if you are doing things that are only in your best interest to do, you have achieved morality. Secondly we have the theory of Psychological Egoism a theory that is based on the idea that each person has but one ultimate aim, their own welfare (Christman, 2002, pg 29). This view is defined as human nature, holding to the belief that all human behavior is motivated by self-interest. This theory results from evaluating the human condition and all of it associated quirks, and can only be accepted as truth if there are no exceptions. Psychological egoism makes no claim as to how one should act because it is not an ethical choice. It also states that people will always seek their own self-interest and that if taken in that context will always be true. The fallacy of the Psychological Egoism theory is that it is irrefutable (Rachels, 2007, p. 73) meaning once an example is given and accepted; that data can be provided and interpreted to support it. The whole idea appears to be overly simple and all inclusive which in itself draws some scrutiny to it. The basic premise of the theory states that people are always motivated by their own......

Words: 927 - Pages: 4

Enron Ethical Issue

...September 22, 2014 Ethical Meltdown This case describes one of the biggest corporate collapses due to unethical practices in the history of the United States. Before the ethical meltdown, Enron was the world’s largest wholesaler of natural gas and electricity. In a competitive market, companies are constantly struggling to improve their services or products in order to gain a competitive advantage. The pressure to succeed sometimes allows for companies to forget their morals and participate in unethical practices. “It turned out that the lack of accounting transparency enabled the company’s managers to make Enron’s financial performance look much better than it actually was” (Dessler, 2013, p. 242). As a result, several top executives were convicted of manipulating Enron’s profit statements and investors lost most of their investments in Enron. This is a perfect example of a company that lacks professional ethics and proper management. Enron was able to succeed and become a huge corporation in the United States economy. However, the loss of morality and ethics eventually led to the collapse of the corporation. In order for a company to become successful and maintain their success a proper ethical culture is needed within the organization. Enron’s Ethical Culture Dessler describes ethics as, “the principles of conduct governing an individual or a group and specifically to the standards you use to decide what your conduct should be” (2013, 240). In order for a company to...

Words: 1074 - Pages: 5

Ethical Theories

...Ethical Theories Virtues, ethics, and morals are what define people as good or bad, their actions as right or wrong. American society holds one’s virtues in high regard and often evaluates one based on virtue and moral conduct. Virtue by definition is, “the quality or practice of moral excellence or righteousness” (Collins English Dictionary, 2010). Thomas Mallory offered the most ethical character in fiction, Lancelot. It is his virtue that “Is an essential aspect of his success in arms” (McCarthy, 1988, p. 22). Virtue ethics and ethical relativism, studied by learned philosophers, help define the basis of right and wrong. Major Elements According to Aristotle, morality is a specific attribute of a person with regard to his or her own inner harmony. Aristotle explained moral attributes in the terms of one’s lucid ability of the inner self to manage its appetite for portion. He asserted that moral attributes are erudite and should be practiced to become habit (Athanassoulis, 2010, para 2). According to the textbook, “virtue is a state of character, that of being a good person” (Freeman, 2000, p. 88). Moral theories concern right and wrong behaviors; but virtue ethics change the kind of questions asked about ethics. Major elements in the theory of virtue ethics are the subjective behavior, qualities and habits that can lead the individual to make choices. This theory helps the individual to ask about right and wrong and how genuine fulfillment may be reached......

Words: 1322 - Pages: 6

Ethical Theories Applied to Euthanasia

...Ethical Theories Applied to Euthanasia It is a patient’s right to make the decision to end their life when they are facing a terminal illness, especially after all attempts to provide pain management have failed. However, these patients are left with few options due to the legal, moral, or religious complications of voluntary euthanasia or physician-assisted suicide (PAS). But, if terminally ill patients had these options available, they would be given the respect to die with the dignity they are entitled to at the end of their life. By applying the utilitarian theory to this question, we would first have to ask, are we providing the greatest amount of happiness or more pain? From a utilitarian point of view, if allowing someone to die with dignity will promote more happiness for them, and those who will be affected by this act, then it is morally ethical. By applying virtue ethics, we would have to ask, whether it is more charitable to continue with pain management until their death, or to relieve their unnecessary pain and suffering by voluntary euthanasia or PAS. Regardless of the moral theories applied, legalizing voluntary euthanasia or PAS, will grant more options, to include reducing the amount of suffering experienced, eliminate the patient’s use of other means to end his or her life, and allow for families to prepare for their loved one’s passing, all of which keeps the patient’s dignity intact. Utilitarianism looks at the best action producing the best......

Words: 2304 - Pages: 10

Ethical Theory

...Applying an Ethical Theory Moral or Ethical dilemmas are an everyday occurrence in our society. The situations present two options as solutions from which one is expected to choose. There is an expectation though that one will choose the option that is considered moral. Ethical questions or problems face every human being at some point in life. One such moral question is; “is it right for women to have abortions”. Abortion has been a major cause of controversy all around the world, with people having different views on whether abortion is good or bad based on their moral beliefs. The main issue that surrounds this ethical dilemma is whether the fetus should have rights to life. Another issue is whether there is justification for a woman to perform abortion based on the rights to her body considering the fetus also has rights to life (Tännsjö, 2008). The deontological theory is not in support of abortion; the objection though, is that women also have rights over their bodies. Discussion Deontological ethics is a moral theory that is in line with common sense intuitions, the scriptures, and natural moral duties or rules. The theory mainly focuses on compliance with moral duties or rules. The main principles of the theory include a task should be carried out for the sake of the obligation. For instance, there is a duty not to do certain things such as murder, lie or break promises since these acts are considered to be wrong. The expected consequences define what the duty is...

Words: 891 - Pages: 4

Ethical Theories

...2. Ethical Theories used to justify Anglo-American’s Obligation to the ethical issue in Chilean Mines 2.1 Virtue Ethics: In virtue ethical theory, an individual is judged by his character rather than by his actions that may deviate from his normal behavior (Fraedrich, Ferrel and Ferrel, 2009). In Chile’s case, application of virtue ethics justifies the following mishaps: Fairness: With Research gathered from the case study, contract workers are assigned much more dangerous tasks with great risks of injury towards their health i.e. the company uses these workers for a certain period of time and do away with them once younger stronger workers become available while protecting their full time staff with easier tasks and extra benefits (Chatterjee, 2014). Compassion: Researchers’ report have shown that unfair labour practices at the mines such as long working hours, dismissal threats etc. These has caused destruction of family ties and negative social attention of miners in the society, Therefore lack of compassion from the employers was exhibited (Chatterjee, 2014). Integrity: The Chileans mines have polluted the dams used for water supply therefore contaminating the water in the community. Although Supreme Court has ordered for the removal of the mines yet the company is yet to comply by the rules, thus endangering the environment and its residents (Aljazeera, 2015). Moreover its expansion to Brazilian amazon encouraged the Brazilian government for improvement in the......

Words: 920 - Pages: 4

Ethical Theories

...Ethical Theories Matthew James Ditolla ETH/316 October 12, 2015 Kevin Barker Ethical Theories How does an individual determine what is right, wrong, ethical, or unethical? Throughout history, people have created various theories to help others answer that question. Virtue theory, utilitarianism, and deontology are examples of ethical concepts. Through personal experiences, and an in-depth look and comparison of the various ethical theories, one gains a greater understanding of them all. Virtue Theory Virtue theory is an approach to ethics that emphasizes an individual's character as the prominent element in making ethical decisions. Dissimilar to the other two types of ethics, virtue ethics focuses on what kind of people we should be. Virtue theorists believe that everyone is born with their set of character traits and that each of us should foster those traits as we grow older. For example, a student in one of my previous cohorts plagiarized a large portion of his assignment and was caught. I knew the student very well, and as a result, I was able to judge the students character when deciding whether or not he intentionally plagiarized. This student usually produced excellent work, and perhaps the student had a family emergency or a late night and forgot to cite his sources properly. In this scenario, I was able to apply virtue ethics and be lenient on my peer. One weakness in virtue ethics is that it does not take an individual's......

Words: 669 - Pages: 3

Ethical Theories

...Assess Students’ Knowledge and Application of Ethical Theories? EB EP Copyright Gregory B. Sadler, 2011 What Do You Need to Know To Assess Students’ Knowledge and Application?  You need basic understanding of each ethical theory  You need to know what to look for in student responses  You don’t need to be in agreement with any of these ethical theories  You don’t need to know whether these theories are ultimately correct or not  You don’t need to be concerned with other “big picture” issues, e.g. the origin of ethics EB EP Copyright Gregory B. Sadler, 2011 What We Are Going To Cover  Five Ethical (families of) Theories  Each articulates a particular perspective on good and bad, right and wrong  Basic Principles / Key Terminology  Important Variations in that family  What to look for in student responses  Knowledge of theory  Application of theory EB EP Copyright Gregory B. Sadler, 2011 Five Theories  Egoism  the self and its needs  Utilitarianism  overall pleasure and pain for all concerned  Deontology  duty  Care Ethics  relationships, vulnerability, and empathy  Virtue Ethics  character EB EP Copyright Gregory B. Sadler, 2011 Three important points  These are not the only Ethical Theories out there  These are among those most frequently discussed in Business Ethics literature  A number of other Ethical Theories which are not the same as these, or......

Words: 2008 - Pages: 9