Enron - Ethics in Business

Project #1

Keller Graduate School of Management

Business Economics ECON545

November/December 2012

Professor: Guerman Kornilov

Ethics in Business

Jeffrey Skilling might not sound familiar to most people, but when you add the title of CEO of Enron, all of a sudden, you get a different tune and then it is a different statement. It is a different story due to their lack of Ethical behavior in business. These few words have changed our landscape in the way we see business. Mr. Skilling and other member of the board tried to make the stock and their accounting in a positive way even though that was not the reality. The following year, WorldCom (MCI), followed in Enron footsteps and the same fate occurred, both companies went into bankruptcy, causing many people to lose their jobs, retirement and their livelihood. In addition, both companies used the same auditing company, Arthur Andersen who at that time was one of the largest firms in the United States, but it their consequence also led to bankruptcy. Their unethical decision of few, caused so much damage to the world economy that new laws are in effect, like the Sarbanes-Oxley Act of 2002. In contrast, Johnson and Johnson in 1982 took a step where ethical business influenced their decision, during the Tylenol recall. They assumed the responsibility of over $100 million dollars in loss to the company, but they wanted to help the consumers and convince them that the problem will be taking care of. The differences between these examples are clearly distinguishable by their choices, one company behaved ethical while the other three looked to deceive the customer. Therefore, the ethical choice by J&J made the company to stand out and expand their relationship with the customer even further. At the same time new regulation ensued by these actions to help the customer, like the tamper proof seal and new manufacturing standards. On the other hand, the other companies no longer survived their unethical behavior. "Companies and businesspeople who wish to thrive long-term must adopt sound ethical decision-making practices. Companies and people who behave in a socially responsible manner are much more likely to enjoy ultimate success than those whose actions are motivated solely by profits. Knowing the difference between right and wrong and choosing what is right is the foundation for ethical decision making. In many cases, doing the right thing often leads to the greatest financial, social, and personal rewards in the long run." (Gruble, 2011) In my company, we have yearly training on business ethics. The training involves different situations and how I should resolve those situations where ethically. In addition, if I see something unethical I need to be aware and to report the situation the respective staff.

Chapter 5 Question #17

"The market period is so short that the output and the number of firms in an industry are fixed; firms simply have no time to change their production levels in response to changes in product price." (Stone, 2011, p. 125) Therefore, the companies have produced all they can and now they have to shift the price to adjust the amount of product available, and sell what they have in inventory. There is little time to do to produce more products. In the short run, the food industry chips might have the advantage in producing more as