Business “Definition” of Ethics
The business world is a battleground between good and evil, ethical and unethical, moral and immoral behavior. While some businesses have found it easy to increase profits by using unethical practices, many have lost everything by doing so and getting caught. Business ethics are not the same as the moral principles or habits that we learn from birth that help us determine what is right or wrong. They’re more practical and local; they’re rules of conduct recognized as appropriate to a particular class of human actions or a particular group or culture; they’re what “society thinks is right to do.” As such, they differ from company to company.
For example Enron was once a successful company but down the roads they suffered a horrible loss that later on became one of the biggest scandals of Wall Street history. Inside Enron, what was determined “appropriate” was very different from moral behavior. This natural gas company named Enron who was first founded in Houston, Texas in 1985 by Jeffrey Skilling and Kenneth Lay was a fast growing American energy, commodities, and services company. Enron was a great business and everything they did was perfectly fine and when everyone was listening to their moral ethics. Before Enron’s scandal the company was worth a decent amount of 13.3 billion dollars in 1996 but the revenue lies didn’t start until 1998 when Fastow was promoted. Enron was also part of the stock market which was used by the new CFO to his advantage which would change the company forever.
The new CFO of Enron was Andrew Fastow he thought that Enron could be making more profit/revenue so he decided to “cook the books” which meant lie on the books about how much money Enron was making annually. He thought if he lied on the books Enron would increase value which also meant in shares in the stock market. This all came from what is known as business ethics; the stock market is a place where people buy stocks/shares of businesses in which case they are considered part ownership of any shares they bought from a particular company, they own only a small percentage of the business as well as gain a bit of income on the side. So what Andrew Fastow do was drive Enron high in revenue to let more income come his way with the help of Arthur Andersen one of the big 5 accounting firms.
Arthur Andersen was also another case that fell into the arms of unethical decisions who helped Enron commit fraud. Both of these companies worked to together so Enron would not be noticed by the S.E.C (U.S. Securities and Exchange Commission) and be in a lawsuit for falsely writing high profits on their books. At the same time Arthur Andersen was not following their morals which they knew this was a wrong decision and that they should have declined the offer but because of greed and money, every decision was made without thinking. In reality Enron was in debt and losing money even though they were worth like a few billion. The only way that Enron was ever getting away with this scandal was paying auditors from Arthur Anderson to make Enron look better to the public; as a growing and upcoming business to consider working for. Arthur Andersen not only helped Enron with a better image to the business world but financially they wrongfully reported their books falsely to cover Enron of getting caught by the SEC.
Eventually the SEC caught up with Enron and their unrightfully acts of stock shares increasing from $20 to $90 in just 3 years which is a valuation of $70 billion dollars with the unethical help of Andrew Fastow. The SEC had to do an investigation on Enron and found out that they were committing one of the biggest frauds in the United States. Enron could easily have done fine without lying about their profits and asking for help to improve their company. They decided to take the risky route and achieve greater money in the least amount of time by committing fraud, disobeying the rules, and not sticking to their business ethics of following the rules to success without cheating. Cause of cheating Enron shut down in 2001 after being 16 years in service, and the CEO’s whose income were like millions of dollars each year, were fined a killer amount of money that each one of them went broke. Jeffrey Skilling was one of the principal CEO’s who was sentenced to 24 years in prison but recently was reduced to only 14 years in prison. Sources say he will be released in 2017.
Not only did the SEC investigate Enron they also investigated Arthur Andersen because the auditor’s job is to find any fraud or errors in books. Once the SEC found dirt on Enron, Enron called the auditors, “The fired partner, David B. Duncan, called a meeting of auditors at the firm’s Houston office and ordered ”an expedited effort to destroy documents” on Oct. 23, the day after Enron disclosed that the S.E.C. had begun its inquiry, the firm said. The destruction apparently did not end until Mr. Duncan’s assistant sent an e-mail message to other secretaries on Nov. 9 that said ”stop the shredding,” the firm said. Andersen had received a subpoena from the S.E.C. the day before.” Now why couldn’t Andersen just give in to the SEC and surrender that they helped Enron instead of trying to shred all the evidence. Andersen could have been given a less painful punishment but since they messed up they paid the consequences. Andersen was one of the big 5 auditing firms in the world next to Deloitte, PricewaterhouseCoopers, Ernst and Young, and KPMG. Now 2017 Andersen is no longer in existence because after this great big scandal no other companies wanted to associate with a firm who were disloyal.
“Every business lies about its ethics” there are many explainations why companies do so. Enron was founded in 1985 but then in 2001 they were finally caught by the Securities and Exchange Commission (SEC) for knowingly manipulating accounting rules and masking the enormous losses and liabilities of the company. When a company does not establish rules of ethics that company like Enron will no more be in business. If Enron were to play by the rules their company would have still been in business and so would have Arthur Andersen. Enron lied about being ethical we could tell by the profits that Enron was making within a small span of time. Once the company Enron knew that they had made committed too much fraud they tried to cover it up with bringing Arthur Andersen, one of the big five accounting firms in the world. Enron convinced Arthur Andersen to money launder their money but since their profit margins were too high the SEC became very suspicious of this amount of money Enron was profiting. In the business world no one is forced into committing these crimes; Arthur Andersen had the choice to decline the offer from Enron to help them with money laundering but because they had no ethics they joined alliances with Enron. Once Enron fell apart they brought Arthur Andersen down too. Enron went bankrupt because of all the dues and imprisonment of the CEOs and Arthur Andersen was destroyed with the bad reputation that no company wanted them to do check their books.
Why the readers might ask is Enron so important, well it is important to know that businesses lie about ethics especially a well-known company that was located on Wall Street and was one of a few companies that Forbes magazine could brag to the United States. Sure there are other companies that have committed a unrightfully act of ethics for instance we have Wells Fargo & company which is an American International banking and financial services holding company located around the whole United States. Recently about one year ago Wells Fargo had a big scandal for phony accounts. As a well trusted bank that many people thought had ethical employees was not true. CNN covered the story saying that 5,300 Wells Fargo employees fired over 2 million phony accounts. These employees secretly opened unauthorized accounts under many of their customers to meet their sales target and receive bonuses. Wells Fargo CEO Timothy Sloan knew that these phony accounts were being made but because of his business ethics he did not stop his employees. I understand that Wells Fargo needs to make profits and meet their margins but having an unethical way of making money it’s just heartbreaking that people don’t care about others and just themselves. Tim Sloan is the one to blame for all this commotion; he even got rich off of these 3.5 million phony accounts that would charge fees to clients for having another open but unknown account. Elizabeth Warren suggested he’d be fired but instead congress let him remain where he is but gave him a big fine of $185 million dollars along with $5 million refund to customers.
Corporations find ethics to be a drain on profits; but every corporation claims to promote strong business ethics. Many businesses have rules of Corporate Social Responsibility that states we must be committed employers, be an outstanding partner to customers, be an environmentally friendly player and service civil society. These are the four pillars every business must stand by but for the most part corporations have the rules to promote but will never follow through because profits don’t come as fluidity like being unethical. Businesses promote that they are truly ethical but how can we believe and trust big time companies when their fraud crime scandals were announced to the business world. Forbes releases a list of most ethical businesses every year which does help a customer if we want the best service without any surprise fees. Most companies that are usually more trustworthy are those that are small businesses because what they want is to make their customers satisfied with the little they have to offer. If we were to trust a company I’d say it would have to be a small one because all the big companies get away with almost anything just like Enron did for 12 years. My point proven, the bigger the companies are, the more unethical they become. Big companies have so many clients that if they lose one they still have others to attend and more so other companies will keep coming to make business relations with other big and superior companies.
If we take a look inside small businesses we tend to see exactly what they provide and have to offer unlike other big businesses that have many hidden fees and tactics. According to a journal by Heledd Jenkins she illustrated and discovered that given the significant scale of small business in nearly every economy, their aggregate achievements have a major effect worldwide. Researchers are now also recognizing the importance of business ethics and social responsibility as they apply to small firms. Take a look at Hasbro Inc, it’s a small manufacturing toy business that ensures great quality products for younger children and takes ethics very serious because they would rather be worried about the child’s safety than the gross income they are receiving and that’s why Hasbro Inc is one of the companies to be selected in Forbes article “Most Ethical Companies 2017”.
People say that business ethics and moral ethics are the same but they aren’t. Moral ethics are what you learn from your parents. While business ethics is more of a one way streak there we must follow it one way however the rules are of that certain company. There is no other way to follow it because of how your parents taught you differently that does not fall into place within the business world. If an employee does not want to follow the firm’s rules the outcome is usually to be fired. This is when employees start to realize how the world really works.
People don’t realize but their so-called “ethics” change once they get exposure to the business world. Morals ethics are different from business ethics. Moral ethics are the principles or habits taught by our parents/guardians to understand and state what is the right and wrong choice to make or do. While business ethics falls under different standards; it is mostly the rules of conduct that a company gives to their employees which usually affect their morals because sometimes we are unwilling to do the tasks of what the company we work for ask us to do. We ask ourselves why do we follow these unethical rules the reason is why we want to keep our jobs and keep supporting our families. The effects of telling the company we work for that we will not follow these unethical rules will end in either getting fired or told that there will be changes but most likely lose the job.
In the business world we won’t hear too much about business ethics, though another term we do hear is corporate social responsibility which is somewhat like ethics just a more narrowly concern about the company’s obligations. CSR plays an important role in every firm or company in the United States. CSR and business ethics go hand in hand if either of them are tampered with or in other terms, people change the rules and make it their own so their business would prosper. Word gets out when businesses do not perform well and lack in any of the four axes such as being a committed employer, build relationships with our customers, serve civil society, being an environmentally friendly player. I believe that the CSR is like an insurance for business ethics, CSR is there to provide people with guidance on how to act within the firm with everybody. However if CSR starts to lack no customer will seek guidance from that firm/company again because of how their service lacked. This affects the business tremendously for example if customers stop recommending others to come to our firm we can not make profit and worse run of our business. That is why having the right kind of ethics is important and should always be looked upon and checked every now and then.
According to a study made my Peter Arlow a journalist who found out which group of people would be more likely to cheat and be negative orientated towards social responsibility. He made tests with the following information: first off he included the major whether they were business majors or non business majors, second he included the sex male or female, third their age either under the age of 24 or equal/over the age of 24. Arlow decided to conduct this test with surveys and then using t tests and correlations to figure out which group was more reliant to follow the rules. Overall the nonbusiness majors scored higher on all five ethical dimensions. Each ethical dimension were based on (Aldag and Jackson, 1977): (1) Traditional Orientation – sees efficient production as the key social responsibility and profit maximization as the corporate goal. (2) Negative Orientation Toward Alleged Social Responsibility – sees social responsibility as a gimmick and a cover for mismanagement. (3) Demander Orientation – calls for diversion of shareholder resources to society in general. (4) Constrainer Orientation – favors tightened control of government over business. (5) Negative Orientation Toward Adequacy of Corporate Social Efforts – sees current corporate social effort in a negative light and sees negative consequences of a lack of social effort. This data was determined under all five of these dimensions of social responsibility and then followed through to which was one would be the most adequate to choose from depending on the score. These were the measurements to access business ethics based on the work of Miesing and Preble (1985): (1) Machiavellianism – moral actions are justified to serve some purpose, (2) Objectivism – the focus is on rational self-interest and avoiding ethical judgements based on feelings, (3) Social Darwinism – accepts percepts of “survival of the fittest, and the strong are morally superior, (4) Ethical relativism – ethical judgements are based on social convention and that which is sanctioned by group norms at a given time and place, (5) Universalism – rules of behavior are absolutes, and apply equally to all places and times. Within the process there were two measurements to be measured it was the business ethics and social responsibility.
As for the results Arlow figured out that business students may not be as self-centered, selfish and opportunistic as the stereotypical view of individuals. Within the business ethics of Meising and Preble the two were Machiavellianism and Darwinism. Which meant that these business students are willing to do business but with a purpose however they would do anything to get to the top, survival of the fittest. When the business and nonbusiness students were compared using the social responsibility measure of Aldag and Jackson there was a significant difference found on the dimensions of Negative Orientation Toward Social Responsibility and the Demander Orientation. These results suggest that non business students are more negative toward current efforts at social responsibility, seeing it as a cover for mismanagement, and the lack of upholding and keeping any company they work well-connected.
Sex wise the data showed that females were less likely to do commit fraud or do anything that would be considered as unethical. The results say that females would want to keep the company from falling and keep it balanced but the males seemed like they didn’t care if the company would collapse as long as they would make profit and have something to live from. That’s why females are considered more passionate and considerate other than males.
While the age group of higher than the age 24 were considered to show a greater negative orientation because of their lives being more ahead of the other people. Older people are considered the most target audience to commit any type of business crime because of them considered to have a family to take care of without a great income it would totally be impossible to maintain a family.
The people who were surveyed mostly students are determined to be influenced by peers from the exposure of the larger sociocultural norms than by education in specific disciplines.
That’s exactly what happened to Wells Fargo customers nationwide. “5,300 Wells Fargo Employees Fired over 2 Million Phony Accounts.” CNNMoney, Cable News Network.
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