Introduction
Ethics refers to moral values that define the behavior of an individual or a group of people. It defines the perception of the good or the wrong things in a society. An ethical organization is therefore an organization that has recognized ethical values which defines what is expected of the organization.
This paper seeks to discuss elements of an ethical organization. The paper will discuss a proposal on how an ethical organizational culture can be created. The paper will adopt an approach of a proposal by a newly appointed director of ethics’ position to a new CEO of an Enron corporation.
Executive summary
This paper is an undertaking following the assignment by the new chief executive officer of Enron Company for a proposal on how the company can start a process of cultivating a culture of organizational ethics.
The paper is written from personal experience in the field of ethics coupled with academic knowledge and research. In the paper, ethical challenges that have been facing the organization are identified followed by a proposal of how the culture of ethics can be created in the firm.
Ethical challenges facing Enron
Enron as an organization has been faced with a number of ethical challenges. The challenges have been realized both with respect to individual employees as well as groups of employees. Cases of the so far reported unethical issues can also be identified as either intentional acts or accidents in the sense of being carefully crafted and planned or otherwise.
It prudent to clarify that ethical value in Enron is not limited to what the corporation has communicated to its works, but rather that these ethics are pronounced by nature of the society in which the company lies.
Every employee of the firm therefore ought to have been molded by the natural sense of doing well and only apply the organizational ethical principles as guidelines rather that strict laws. One of the ethical challenges that Enron corporation has been facing is the issue of “basic honesty and conformity to law” (National, n.d., 1).
Honesty involves expressing the true nature of occurrences around an individual. Employees have however been reported to act contrary to the organizations expectation over honesty.
There have been identified cases of dishonesty in the organization and even some isolated instances under which dishonesty have been carefully planned, executed and then covered by some of the organization’s top managers. Conformity to law has also been an ethical issue in the Enron.
In their dishonest moves to attain personal motives at the expense of the organization, employees have gone overboard into conflict with legal requirements. Since the organization is a profit making entity, it is under constitutional laws and regulations that govern business entities.
A dishonest move by an employee such as an accountant or a manager defrauding the organization of its finances is actually a constitutional infringement of rights of shareholders and stakeholders of the entity.
Dishonesty and activities contrary to law has challenged the entity which has in some instances referred some matters to national authorities for investigations and subsequent prosecutions (National, n.d.).
There has also been a significant level of conflict of interest realized among a number of employees. The issue of conflict of interest is the breach of a dividing line between the interest of the organization and that of its individual employees. Cases of moves to embezzle funds of the organization have been the major drives to conflict of interest as reported.
Some of the employees have resorted to focus more on the much that they can derive from the organization that on the organization’s revenues. With this respect, some employees have always been looking for opportunities to selfishly steal from the company.
Cases such as “embezzlement of funds, bribery and contract kickbacks” have been steps that some of the company’s managers have used to further their personal interests (National, n.d.). “Service orientation and procedural fairness” has also been compromised within the entity’s operations.
In line with conflict of interest, some top officials have used their influence to cover their positions, while not performing, and at the same time use their power to unfairly handle junior employees and partners to the institution.
It is with this respect that top company officials have been acting contrary to the organization’s prescribed regulations and even regulations defined by law. Decisions over policy making have also been a significant aspect of identified ethical challenge.
Policy making defines the operation of the entity in terms of directing activities of the organization as well as allocating resources to each and every department. Cases of poor allocation of funds for projects to influence chances of misappropriation of funds have for example been identified in the organization.
Under this approach, an administrator identifies a project that can be easily manipulated and allocate funds to it. Such funds that might be allocated in excess are then squeezed into individual’s personal accounts.
Consideration of social responsibility which is a major ethical move especially to the entity’s immediate community has also received significant challenge in the organization’s management. Cases have also been reported of moves to manipulate such activities in a corruptible ways.
Just like in policy determination, the company’s activities towards social responsibilities have been characterized with lot malpractices with manipulations towards benefits that are diverted back to influential individuals in the company.
This has taken different approaches with manipulated accounting records among others. These unethical practices have in the long run caused a lot of direct harm to the entity and indirectly affected stake holders such as partners and beneficiaries under the company’s social responsibility programs (Borgatt & Molina, 2003).
Specific ethical breaches in the company have also exploded over time hitting news headlines and leading to a number of prosecutions of the company’s high ranked officials.
Misappropriation of the organization’s funds is for instance reported to have started in the year 1987 with the promotion of risky ventures that were claimed to be beneficial to the company. Malpractices have been invested in the accounting department to portray a false image of the company to the public.
This dishonest act has been used to hide the company’s true status and to the contrary influence the public into believing that Enron has been profitable. Practices such as silencing public watch dogs like financial analyst has been common with the organization.
Offering of lucrative contracts to the financial firms and individuals without considerations of the competence of the contractors with respect to tenders being awarded to them has negatively affected the company.
While finances and efficiency has been lost through these contracts, the contracting partners have helped the unethical administrators to hide the true financial status of the organization. The practices in the company has witnessed an established extremely wealthy top managers who earned money through defrauding the company at the expense of the junior employees whose jobs and even benefits have been at risk with most employees loosing both without being compensated (Gibney, 2004).
Proposed changes at Enron
An ethical organization is one in which ethical values are upheld as an organizational culture. Ethical values are therefore in such cases exhibited in individual employees and teams in the organization as well as in the overall nature of the organization.
With its definition of the wrong and the right, ethical values will ensure a culture of adopting conducts that are not driven by selfishness among employees of the organization. There are different approaches following different modalities that can be applied in the creation of an ethical organization.
One of the approaches is based on the process of creating an ethical organization while the other approach looks into the technical issues that are involved in creation of such an organization. With regard to the creation process, an ethical organization can be established as a project within the organization.
Under this approach, ethical values are administered in the form of a policy. This method can be achieved by establishing the desired guidelines of ethical values, subjecting members of the organization to the values and then monitoring the adoption of such values by the members.
The approach is more of an authoritative one that gives orders in relation to what is supposed to be done in the organization. If successfully implemented, the organization will have adopted ethical values.
Another approach to instituting ethics that can be adopted by Enron is the critical analysis of the organization which involves reviewing relationships within the organization as well as that between the organizations with other institutions.
The result of the review which will reveal ethical inefficiencies as well as the needed adjustments with respect to requirements from external forces then determines the direction of creating ethical guidelines in the company.
This approach is more receptacle that the previous one since it is driven by the feelings and needs of members of the organization unlike the approach that is dictated by the management. Similarly, an ethical organization can be created by applying a personalized approach to the organization through motivations and incentives which will drive the organization’s members to personally acculturating the culture of ethical values.
This approach can be applied together with providing an outline of what the company expects of its employees. It will therefore, if successful influence members of the organization to align themselves to the prescribed guidelines by the organization.
Under this approach, individual members of the institution are believed to be inclined to being ethical regardless of their environment. If the individual efforts towards ethical behavior are combined together with a motivational factor, the firm will attain its desired level of ethics (Holstein and Mitzen, 2000).
Apart from an organizational method of instituting observance to ethical practices, a number of technicalities are supposed to be analyzed before adopting or even imposing principles on the organization’s employees. Review should for example be done to ascertain the main cause of unethical practices.
It should be clear whether the undesirable behavior is related to individual employees of the institution or whether the problem is originating from the structure of the organization. The problem could also be due to an adopted culture that has over time been passed from one generation to another in the organization.
Though problems such as those instigated by senior personalities in the organization might be difficult to resolve, as in the case where the founder of the corporation and his chief executive officers have been colluding to defraud the organization’s partners of their funds, a move can be made with the introduction of the new management to inject fresh values in the organization.
Identifying the critical causes of the problem is important since failure to do so might introduce ethics that are not at all related to the problem that has been facing the organization.
Increasing remunerations to a manager who has defrauded the company of billions of dollars might for example not be an adequate solution to the problem since the person is less likely to be influenced the increment which might not be satisfactory (Fernando, 2009).
When ethical compromises are especially identified with the top management, or even in making a step to generally build upon ethics in an organization, it is important to concentrate on the top managers who will in turn affect the relationships and behavior on junior employees.
Managers with ethical values will for example be swift in ensuring that ethics is adopted and implemented in the organization. A key tool therefore lies in ensuring ethical top administrators for an effective of the same virtues in the organization.
One of the recommended techniques to achieving this is by selecting managers on the basis of “pro social intrinsic preferences to ensure the conditional cooperation of the other employees” (Fernando, 2009, p. 123).
Another tactic that is aimed at controlling the act of defrauding the company of its finances is the establishment of a fixed remuneration system to the organization’s managers based of the “fair market wage for their overall performance” (Fernando, 2009, p. 123) in the company.
This move is supposed to help in eliminating temptation that these people may face when they feel under remunerated as compared to employees in other organizations. Relatively high remunerations may also influence some people negatively.
The employees should also be influenced to a culture of condemning unethical behavior in the organization. Involvement of corporate governance together with establishment actual steps such as outlining codes of conduct, mechanisms for implementing the codes together with training and disciplinary measures with respect to ethics are identified avenues to creating ethics (Fernando, 2009).
Adoption of a leadership style that is oriented towards promoting ethical behavior is also recommended for the company’s new leadership.
A leadership that will be keen in identifying employees who cannot transform into ethical conduct and eliminating them from the organization with subsequent encouragement to the group that ensures ethical behavior and those that are willing to change into the company’s prescribed ethical culture.
The adopted leadership should be able to prioritize the organization’s objectives and need for honesty (Pollock, 2008).
Conclusion
Enron Company has been a victim of unethical practices that has been cultivated at the top management levels. The identified ethical challenges that involve dishonesty into defrauding the company can be solved by initiating a comprehensive approach into changing the organization’s leadership structure and culture.
References
Borgatti, S. & Molina, J. (2003). Ethical and strategic issues in organizational social network analysis.
Fernando, A. (2009). Business Ethics: An Indian Perspective. New delhi, India: Pearson Education India.
Gibney, A. (2004). Enron: The smartest guys in the room. (film).
Holstein, A. & Mitzen, P. (2000). Ethics in Community-Based Elder Care. New York, NY: Springer Publishing Company.
National. Values and ethics. Web.
Pollock, J. (2008). Ethical Dilemmas and Decisions in Criminal Justice. Belmont, CA: Cengage Learning.