Studies of business theory and organizational behavior have both classically and currently held with total consistency the importance of sound business ethics to the success of a business. The role of ethics today, as in the past, is one directly proportional to the ability of an organization to achieve stability, efficiency and profitability as well as to remain with the limitations of the law in terms of policy and practice. Yet, there is stark evidence that the realm of corporate business has been occupied by an increasingly lesser interest in business ethics in favor of corruption, exploitation and short-term gratification.
The discussion here will cite some prominent examples of corporate collapses in recent history to demonstrate that the failure of business ethics may likely result in the failure of the organization as a whole. In addition to highlighting the role of ethics in today’s business world, the research and analysis conducted here will likewise point the way to some resolutions for strengthening this association, including the improvement of corporate oversight and corporate regulation.
As evidence here demonstrates, business ethics and business law are both closely associated to the establishment of a healthy organizational environment. Still, there is also considerable evidence to demonstrate that such aspects of today’s business world such as legislative deregulation, corporate outsourcing and globalization have made both law and ethic difficult to reconcile with market demands and pressures.
In direct contrast to the current and sustained phase of economic stagnation experienced by the U.S. economy for over half a decade, the mid-1990’s was a period of dramatic and unprecedented economic growth in the United States, where technological evolution and corporate expansion were together feeding a robust and seemingly unlimited skyward momentum. This would prove a false impression by the turn of the millennium, with the economy’s growth as much precipitated on fraudulent corporate accounting, corrupt internal cultures and, ultimately, unsustainable organizational practices, as on actual progress.
With the collapse of such major modern upstarts as Enron, Tyco and WorldCom, all of them destroyed internally by the embezzlement, misrepresentation and greed of their own leaders, it would become increasingly apparent that the presence of strong, defined and enforced business ethics codes is a determining factor in the long-term viability of corporations large and small.
By the turn of the millennium, this correlation between business ethics and organizational survivability would become incontrovertible, with the decline of such mega-corporations bearing a dramatically ill-effect on economy which has yet to recover. This justifies the central finding of this account, that the construction of a sound and clear code of conduct, mode of oversight and means of enforcement is a requisite part of building and maintaining a successful organization and also demonstrates the most amenable path to parsing challenging legal questions.
Within the academic scope of business theory, it is argued that an ethically-bound organization will be shaped by such a proclivity in its leadership. To this end, we might understand the part which effective and exemplary leadership will play in setting the parameters governing other members of an organization. Functioning in this role, business theory tells us, presents leaders with “a unique set of ethical challenges in addition to a set of expectations and tasks. These dilemmas involve issues of power, privilege, deceit, consistency, loyalty, and responsibility.
How we handle the challenges of leadership will determine if we cause more harm than good.” (Johnson, 10) This is to indicate that one characteristic of the current business climate is the emphasis on more conscientious leadership. With many of the corporate scandals of the early millennium implicating the highest offices of some leading firms, today’s corporate atmosphere is informed by an emphasis on ethically determined leadership. This is an important aspect of improving the stewardship of businesses today struggling to find footing in a changing market.
Still, evidence does abound to indicate that recent corporate scandals are directly indicative of a negative pattern in both ethical and legal regards that extends beyond any single organization. There is, instead, practical evidence in the epidemic nature of this generation’s collective collapse to suggest that a need still exists for greater orientation toward ethical organizational practice. The absence of a defined or meaningful interest is business ethics is captured best in the most prominent of such breakdowns to occur within this generation.
Enron, the energy concern that emerged in the late 1980s and, within a decade, had established itself as the largest energy provider in North America, also possessing prodigious contracts with the British government and direct ties to the incoming presidency of George W. Bush. But just as Enron had been a symbol for the perceived economic prosperity of the 90’s, so too would it become emblematic of the malfeasant underbelly of America’s increasingly unregulated and poorly self-governed corporations. In 2002, allegations came to the surface that the organization’s core of executive leaders had misrepresented company earnings, participated in insider-trading and had essentially looted the company of its value.
Through its accounting firm, the likewise large-scaled Arthur Andersen, “Enron lied about its profits and stands accused of a range of shady dealings, including concealing debts.” (BBC News, 1) The company’s top executives had misled investors and shareholders with regard to actual performance indicators and stock values, creating a false investment atmosphere which persisted for years as a front for the embezzlement of top officials. When the company’s collapse became inevitable, its shareholders collectively pulled out, forcing the company to file for Chapter 11 bankruptcy.
Its ethical misappropriation would send a shockwave through the corporate world, contributing to the outright dissolution of control over Arthur Andersen, the destruction of Enron’s employee pension fund, the onset of a federal probe into the company’s clear improprieties and the consequent revelation of an epidemic of corruption in the corporate world at large. And to this last effect, as with Enron, for many other companies guilty of the same fraudulent practices, the consequences would be total collapse.
In examining the cases at Enron, WorldCom, Tyco and Adelphia, to name the most significant scandal revelations amongst innumerable more, it becomes increasingly clear that there exists a direct connection between specific operational problems and this deviation from ethical soundness. The behavior seen here is indicative of a modern business atmosphere in which, while institutional shortcomings or political motives appear to obstruct the prevention of corruption, there is nonetheless a certain speed of market which ultimately prevents such an entity from enduring competition and service responsibilities.
In each of the cited cases, the felonious indiscretion of corporate leaders, combined with an absence of centralized oversight in order to provoke an atmosphere of perceived lawlessness. The absence of interest in long-term organizational viability at the highest levels of the American corporate hierarchy have represented a fundamental obstruction to the collective adherence to valid ethical standards. Thus, the failure of the companies addressed here may genuinely be attributed to the behavior of top leaders and decision-makers, themselves an active part of an overarching culture with short-term, high-yield financial objectives.
In the case of Enron and other cited examples from this era of collapse, the challenges of balancing ethics and interests were met head on with a stewardship of executive self-service and malicious accounting procedures. These conditions, though, would be the product of a larger still corporate culture devoid of ethical consideration. The prevailing trend across the decade of explosive growth had been to bypass such priorities in favor of exploiting the unregulated tenor of consolidation and an absence of oversight.
The economy as a whole, boomed on a wave of unsupportable and speculative premonitions of growth, and as it did so, its industry leaders would appear as paragons to a new frontier for expansive potential. This exact reflection would be apparent in the downturn of the economy as well, directly paired with the decline of the previous decade’s pacesetters.
And with the collapse of so many major upstart corporations, revelations of internal financial sabotage illustrated that a new culture had occupied America’s corporate leadership. The gradual diffusion of public shareholding to the general public created a circumstance in which significant interests in major corporations were substantially comprised of popular investment. For CEO’s of such companies as Enron, WorldCom, Tyco, Adelphia, Arthur Andersen and countless other multibillion dollar enterprises, the public diffusion of investment represented an opportunity to seduce the contribution of capital on false terms and to loot company coffers of the capital needed to remain afloat.
Where the impulse of their historical coefficients had been to engage corrupt practices to the end of expanding the company’s capacity for profitability, this new generation of CEOs has sought essentially to use their corporations as money-siphons by which to concentrate public wealth into the hands of very few already lavishly wealthy individuals. This is an especially, and intentionally, faulty approach to business orientation, considering that with companies of a certain scale, the effects of both success and failure will be shared by a great many parties
BBC News. (August 2002). Enron Scandal at-a-glance. British Broadcasting Company. Online at <http://news.bbc.co.uk/2/hi/business/1780075.stm>.
Friedman, Tom. (2005). The World is Flat: A Brief History of the 21st Century. Farrar, Straus and Giroux.
George, Bill. (2003). Authentic Leadership: Rediscovering the Secrets to Creating Lasting Value. Jossey-Bass Publishing.
Kelly, Marjorie. (2004). It’s A Heckuva Time to Be Dropping Business Ethics Courses. Business Ethics Magazine. Online at < http://www.business-ethics.com/BizSchlsDropEthics.htm>.
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Skeel, David. (2005). Icarus in the Boardroom: The Fundamental Flaws in Corporate America and Where They Came From. Oxford University Press.
Webley, Simon & Elise More. (2003). Does Business Ethics Pay? Institute of Business Ethics. Online at < http://www.ibe.org.uk/DBEPsumm.htm>.
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