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Business EthicsBusiness Ethics

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Definition of EthicsDefinition of Ethics Comparison between Character and BehaviourComparison between Character and Behaviour Meaning of Business EthicsMeaning of Business Ethics Relationship between Business and EthicsRelationship between Business and Ethics Characteristics of Business EthicsCharacteristics of Business Ethics Enron’s CaseEnron’s Case

Definition of EthicsDefinition of Ethics

Ethics has been derived from the Greek word Ethics has been derived from the Greek word “Ethikos” which pertains to character.“Ethikos” which pertains to character.

Ethics can also be defined as “morality of Ethics can also be defined as “morality of science”science”

The word morality has been defined as The word morality has been defined as ‘moralis’ which means behaviour.‘moralis’ which means behaviour.

Comparison between Character and Comparison between Character and BehaviourBehaviour

A strong behaviour and character is reveled through A strong behaviour and character is reveled through personalities like Gandhi.personalities like Gandhi.

A strong character and weak behaviour is revealed A strong character and weak behaviour is revealed like Hitler.like Hitler.

A weak character and strong behaviour is revealed in A weak character and strong behaviour is revealed in case of salesman.case of salesman.

A weak character and weak behaviour is revealed in A weak character and weak behaviour is revealed in case of ordinary individuals.case of ordinary individuals.

Meaning of Business EthicsMeaning of Business Ethics

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

Relationship between Business and Relationship between Business and EthicsEthics

The Unitarian ViewThe Unitarian View

Separatist ViewSeparatist View

The Integration ViewThe Integration View

The Unitarian ViewThe Unitarian View

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

The Separatist ViewThe Separatist View

Classical economists like Adam Smith and Classical economists like Adam Smith and Milton Friedman asserted that the only goal of Milton Friedman asserted that the only goal of business should be profit maximisation.business should be profit maximisation.

Adam Smith and Friedman were of the Adam Smith and Friedman were of the opinion that business should be left alone to opinion that business should be left alone to play by the rules of the prevalent market play by the rules of the prevalent market system, and the introduction of ethics would system, and the introduction of ethics would make an imbalance of the market dynamics.make an imbalance of the market dynamics.

The Integration ViewThe Integration View

The Integration View: This view states that The Integration View: This view states that business is an economic entity and it has the business is an economic entity and it has the right and the need to make profits, but, it must right and the need to make profits, but, it must also discharge its obligations to the society also discharge its obligations to the society where it exists and operates.where it exists and operates.

This view states that society consists of a This view states that society consists of a number of subsystems, and business and number of subsystems, and business and morality are just two of these subsystems.morality are just two of these subsystems.

Characteristics of Business EthicsCharacteristics of Business Ethics

Ehtical decisions differ with the individual Ehtical decisions differ with the individual perspective of different persons. Each person perspective of different persons. Each person views the ethical question in terms of his or views the ethical question in terms of his or her own frame (ex: dam construction)her own frame (ex: dam construction)

Ethical decision are not limited only to Ethical decision are not limited only to themselves, but affects a wide range of other themselves, but affects a wide range of other situations as well.(ex: unethical practices of situations as well.(ex: unethical practices of the company)the company)

Characteristics of Business EthicsCharacteristics of Business Ethics

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

(bribe)(bribe)

History of the Enron CoHistory of the Enron Co

Founded :Founded :Omaha, NebraskaOmaha, Nebraska,1985 ,1985

Headquarters :Headquarters :Houston, TexasHouston, Texas, , USAUSA

Key people :Key people :Kenneth LayKenneth Lay, Founder, former , Founder, former Chairman and CEOChairman and CEO

Jeffrey Jeffrey SkillingSkilling, former CEO and COO, former CEO and COO

Andrew Andrew FastowFastow, former CFO, former CFO

Rebecca Mark-Rebecca Mark-JusbascheJusbasche, former Vice Chairman, , former Vice Chairman, Chairman and CEO of Enron InternationalChairman and CEO of Enron International

Nature of Industry and Revenue Nature of Industry and Revenue generationgeneration

IndustryIndustry : : EnergyEnergy

RevenueRevenue :$111 billion (in 2000) :$111 billion (in 2000)

SloganSloganAsk Why?Ask Why?

WebsiteWebsiteEnronEnron

Source of incomeSource of income

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

Enron’s caseEnron’s case

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

Accounting fraudsAccounting frauds

As was later discovered, many of Enron's As was later discovered, many of Enron's recorded assets and profits were inflated, or recorded assets and profits were inflated, or even wholly fraudulenteven wholly fraudulent..

Many of the debts and losses were not shown Many of the debts and losses were not shown in the balance sheet of this company.in the balance sheet of this company.

The scandal also caused the dissolution of the The scandal also caused the dissolution of the Arthur Andersen accounting firm, affecting the Arthur Andersen accounting firm, affecting the wider business worldwider business world..

Effective managementEffective management

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

Enron caseEnron case

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

End of the EnronEnd of the Enron

On On September 7September 7, , 20062006, Enron sold , Enron sold Prisma Energy International Inc.Prisma Energy International Inc., its last , its last remaining business, to Ashmore Energy remaining business, to Ashmore Energy International Ltd. Following the scandal, International Ltd. Following the scandal, lawsuits against Enron's directors were notable lawsuits against Enron's directors were notable because the directors settled the suits by because the directors settled the suits by paying very significant sums of money paying very significant sums of money personallypersonally

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