Business Ethics

Contents

Definition of Ethics Comparison between Character and Behaviour Meaning of Business Ethics Relationship between Business and Ethics Characteristics of Business Ethics Enrons Case

Definition of Ethics
Ethics has been derived from the Greek word Ethikos which pertains to character. Ethics can also be defined as morality of science The word morality has been defined as moralis which means behaviour.

Comparison between Character and Behaviour

A strong behaviour and character is reveled through personalities like Gandhi. A strong character and weak behaviour is revealed like Hitler. A weak character and strong behaviour is revealed in case of salesman. A weak character and weak behaviour is revealed in case of ordinary individuals.

Meaning of Business Ethics

Business ethics is the branch of ethics that examines ethical rules and principles within a commercial context; the various moral or ethical problems that can arise in a business setting; and any special duties or obligations that apply to persons who are engaged in commerce. Those who are interested in business ethics examine various kinds of business activities and ask, "Is the conduct ethically right or wrong?"

Relationship between Business and Ethics

The Unitarian View Separatist View The Integration View

The Unitarian View

The Unitarian View: The business is a subset of the moral structure of the society. According to this view, business and morality cannot be separated and business must play by the rules of morality and ethics of the community which guides the activities of the community.

The Separatist View

Classical economists like Adam Smith and Milton Friedman asserted that the only goal of business should be profit maximisation. Adam Smith and Friedman were of the opinion that business should be left alone to play by the rules of the prevalent market system, and the introduction of ethics would make an imbalance of the market dynamics.

The Integration View

The Integration View: This view states that business is an economic entity and it has the right and the need to make profits, but, it must also discharge its obligations to the society where it exists and operates. This view states that society consists of a number of subsystems, and business and morality are just two of these subsystems.

Characteristics of Business Ethics

Ehtical decisions differ with the individual perspective of different persons. Each person views the ethical question in terms of his or her own frame (ex: dam construction) Ethical decision are not limited only to themselves, but affects a wide range of other situations as well.(ex: unethical practices of the company)

Characteristics of Business Ethics

Most ethical decision involve a trade-off between costs incurred and benefits received.(ex:inverse relationship between profit maxisation and social responsibility) Every person is individually responsible for the unethical decision and action that he or she takes. (Democracy) Ehical decisions are voluntary human actions. (bribe)

History of the Enron Co

Founded :Omaha, Nebraska,1985 Headquarters :Houston, Texas, USA Key people :Kenneth Lay, Founder, former Chairman and CEO Jeffrey Skilling, former CEO and COO Andrew Fastow, former CFO Rebecca Mark-Jusbasche, former Vice Chairman, Chairman and CEO of Enron International

Nature of Industry and Revenue generation

Industry : Energy Revenue :$111 billion (in 2000) SloganAsk Why? WebsiteEnron

Source of income
Enron was originally involved in the transmission and distribution of electricity and gas throughout the United States and the development, construction, and operation of power plants, pipelines, and other infrastructure worldwide.

Enrons case
Enron grew wealthy, it claimed, through its pioneering, marketing and promotion of power and communications bandwidth commodities and related derivatives as tradable financial instruments. Enron was named "America's Most Innovative Company" by Fortune magazine for six consecutive years, from 1996 to 2001. It was on the Fortune's "100 Best Companies to Work for in America" list in 2000, and had offices that were, in hindsight.

Accounting frauds
As was later discovered, many of Enron's recorded assets and profits were inflated, or even wholly fraudulent. Many of the debts and losses were not shown in the balance sheet of this company. The scandal also caused the dissolution of the Arthur Andersen accounting firm, affecting the wider business world.

Effective management
Enron was hailed by many, including labor and the workforce, as an overall great company, praised for its large long-term pensions, benefits for its workers and extremely effective management until its exposure in corporate fraud.

Enron case

In August 2001, Daniel Scotto, a top ranked utility analyst issued a report entitled "Enron: All Stressed Up and No Place to Go" lowering his rating on Enron warning investors to sell securities in the company at all costs since the departure of Chief Executive Officer Jeffrey Skilling would likely cause the company to implode due to it's leveraged balance sheet and questionable corporate activities.

End of the Enron

On September 7, 2006, Enron sold Prisma Energy International Inc., its last remaining business, to Ashmore Energy International Ltd. Following the scandal, lawsuits against Enron's directors were notable because the directors settled the suits by paying very significant sums of money personally

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