Question

Outline for a research paper for business ethics and financial scandals of Enron and AIG companies.

Answer 1

Business Ethics, as the term clearly denotes, is application of moral principles and behaviour within corporations and businesses, and their implementation in every decision and action undertaken by them. Morality and ethics is of paramount importance within the corporate environment, considering the massive cascading effect and the widespread influence of actions and decisions of some corporates, on not only their large employee base, but also upon society as a whole. It can effectively impact in a major way or ruin, thousands of lives, with a single immoral decision or unethical action.

Such decisions and actions may be based on various factors influencing personal gain be it monetary or otherwise. It may be false representation of products to attract customers and boost sales and profitability, make false representations of corporates accounts to attract investors and finances through this false information. Other decisions with far reaching implications include unethical disposal of production waste materials, even consisting of hazardous waste, leading to widespread damage to the environment and health of residents in the affected area. Another major area main unethical practices can have a huge negative impact on society is with companies manufacturing goods which are inherently sensitive. The pharmaceutical industry is one such area where even mine unethical practices resulting in poor quality of product can have a massive impact on human safety and lives. Another search area is the automobile industry, where the safety of the user depends largely on the quality of the product, as well as, all the spare parts utilised in its manufacture. Financial frauds within organisations another form of unethical actions, of a group of individuals, within an organisation having widespread impact on all the employees as also all the consumers and investors of the organisation. Therefore, we can see how important it is for ethics to be inculcated within every organisation and at every level of management. The actions of a single person or a small group of individuals within an organisation can bring down even giant Corporates. Every organisation right at inception should ensure that sufficient control measures are adopted within the basic principles and guidelines of operation, which not only check immortality but actively discourage it. Also the entire organisation should be educated on all the advantages which accrue from creating and maintaining unethical image externally which resonates in the internal atmosphere of the organisation. Every individual connected to the organisation should recognise and understand the ethics followed and demanded by the organisation and be forced to abide by the same.

We only have to look at the history of various candles within organisations to understand the widespread implications of search and ethical practices resulting in destruction of large Corporates. The American International Group scandal which took place in the year 2005 related to fudging of company accounts and presenting a false picture on the basis of which, investors bought large quantities of the company's shares, causing the share price to rise rapidly. It's so Hank greenberg also was known to have utilised the services of stock traders to cause further inflation and share price. Once the securities and exchange Commission became aware of this project and practice of the company, it imposed a $1.64 million fine, including further sums of $115 Million to a Pension Fund in Louisiana as also $7.25 million to various pension funds in Ohio. The fraud was achieved through booking of loans as revenue in the accounts and also insisting on clients utilising services of insurance with which the company acquired preexisting payoff agreements. It clearly exemplifies the adage that honesty is the best policy and dishonesty rarely pays.

The Enron company fraud which occurred in the year 2001, and was also based on accounting practices which led to misrepresentation of facts, and concealment of the true financial picture of the company, in the balance sheet. The company has been utilising various loopholes present in accounting practices which can be utilised to conceal huge amounts of bad debts with simultaneous inflation of the company's earnings. A Securities and exchange Commission investigation revealed the misrepresentation of facts within the balance sheet of the company who application of pressure on the auditing firm Arthur andersen to overlook the miss representation. A sentence and unprecedented drop in the share price from $90 to under $1 within the year causing shareholders a loss of over $74 billion. The CEO of enron at that time Jeff Skillings, as well as the former CEO Ken Lay framed and convicted, along with the firm of Arthur andersen. The scandal led to the dissolution of both the companies Enron as well as Arthur andersen. 20000 employees the auditing firm lost their jobs and in spite of the conviction being later overturned it served as little consolation for these employees destroying their careers effectively. It also caused huge losses 2030 par who had invested a major part of their savings in the organisation. Hence, it is clear that simple unethical practices of a few people within an organisation, having the power vested in them to make important decisions can have for reaching implications for society at large.