What is ethics? When do we cross the line between right and wrong and who determines when that line is crossed? Ethics can be defined as moral philosophy. It is basically “the discipline concerned with what is morally good and bad, right and wrong. The term is also applied to any system or theory of moral values or principles” (Ethics, Encyclopedia Britannica Online, 2000). When we apply the concept of ethics to business the scope broadens. Business ethics is “the study and evaluation of decision making by businesses according to moral concepts and judgments” (Business ethics, The Columbia Encyclopedia, 2007). In this paper I will be discussing business ethics, including three common misunderstandings, one major taboo of corporate social responsibility discourse, and give examples of two major corporation scandals, Enron and WorldCom.
When you think of the words business and ethics you usually don’t relate the two. This is due to three misunderstandings. The first is that morality and profits just do not mix. If you make money then you are considered successful but you have to become corrupt to make money. The second misconception is that all ethical problems can be solved in a simplistic manner and that the problems are always either right or wrong. There is no in between. When we assume this concept is true, we tend to ignore the gray area in between and as a result, ignore the fact that soul-searching might me necessary to come to a decision about an ethical problem. The third misunderstanding is that ethics is following a set of regulations or rules. When we think about it, the legal issue might not be related to the moral issue or just the opposite. (Lamberton & Minor-Evans, 2007).
When we think of corporations today we consider them to be responsible, thanks to CEO’s and business advocates portraying it to be so. This concept of believing in corporate goodness is naïve. The cases involving Enron and WorldCom prove just that. This leads us to the taboos in corporate social responsibility discourse. These taboos are rarely discussed, yet it is a very important topic. Why should we discuss taboos? According to Berger and Luckmann, “from the social constructionist’s perspective, social reality is built around and becomes understood through discourse. However, some discourses have a higher ‘truth’ value than others. As a consequence they easily become generally accepted, sometimes even considered as absolute truths that are not easily questioned” (1966).
It is important to one’s career to follow the prevailing discourse. It would not be smart “for a CEO to publicly question the firm’s social responsibility, rather than to underline the ethically high principles that steer corporate actions”, as stated by Crook (2005). This can be related to the Enron case. Sims and Brinkman contend, “One can only wonder how a firm that was previously glorified as such a shining example of a corporation with high CSR standards can suddenly turn out to be rotten inside” (2003). Enron is just the beginning. WorldCom is also considered to be corrupt. The following is an excerpt from the Enron scandal as told by BBC News.
It has been discovered that executives at Enron have offered bribes to tax officials. No income tax was paid between 1996 and 1999 and the ethics of the tax officials is in question. The report that disclosed this information is like reading a step by step analysis of how to abuse the tax system. The collapse of Enron was a shock to many people, especially those with retirement savings. It appeared that Enron was prosperous at the time of failure. Lawmakers are trying to improve laws so that this situation cannot happen again in the future.
Surprising Facts
The IRS had no idea what was going on due to the complex transactions being performed.
The investigation provides the first complete story of Enron’s efforts to manipulate its taxes and accounting (BBC News, 2003).
In the WorldCom scandal there were two major crooks that were prosecuted and punished. Here are two excerpts pertaining to this as reported by Schmidt at CBS MarketWatch.
The $11 billion accounting scandal case finally came to a close on March 15, 2005. The jury took eight days to come to the decision to find Ebbers, the WorldCom co-founder, guilty of seven counts of making false filings and one count of securities fraud.
Its possible Ebbers could spend the rest of his life behind bars and pay out millions. The jurors were told, during the trial, that Ebbers took out more than $400 million in company loans. Scott Sullivan, WorldCom’s former financial officer, claimed that Ebbers told him to participate in fraud to cover up any disclosure of the company’s falling financial condition. Ebbers claimed he was not knowledgeable about technical financial matters and it was Sullivan who was the expert. He denied asking Sullivan to do any cover-up.
Surprising Facts
WorldCom was plunged into bankruptcy due to the accounting scandal. The market value once topped $180 billion.
Sullivan helped prosecutors so he could possibly receive a lighter sentence but the defense questioned his motive since he did this after pleading guilty to fraud charges (Schmidt, 2005). “Former WorldCom Chief Financial Officer Scott Sullivan, whom prosecutors labeled as the architect of the company’s massive fraud, was sentenced to five years in prison Thursday for his role in the scandal” (Schmidt, 2005, para.1).
“Sullivan, who faced 165 years in prison but whose cooperation with investigators had widely been expected to temper his sentencing, was convicted on three counts of fraud, conspiracy and filing false financial statements” (Schmidt, 2005, para.2).
“Sullivan’s cooperation was pivotal in the prosecution of former WorldCom chief Bernard Ebbers. He was sentenced in July to 25 years in prison after he was convicted on nine counts of fraud and related charges in connection with WorldCom’s attempt to conceal billions in expenses as a means to inflate profits”( Schmidt, 2005, para.3).
Surprising Facts
“Their actions were at the center of an $11 billion accounting fraud” (Schmidt, 2005, para.4).
“To settle a civil suit filed by investors, Ebbers has already agreed to relinquish most of his personal wealth to partly compensate shareholders for their losses. His personal assets are valued at $25 million to $40 million” (Schmidt, 2005, para.10).
There is rarely any evidence of taboo, their existence is just accepted. The taboo that I am going to discuss is the taboo of amoral business. This means “it is considered neither moral nor immoral, but ‘outside’ moral conceptions as such” (Kallio, 2006, p. 167). This concept is usually linked to Nobel Prize winner economist Milton Friedman. He states that “there is one and only one social responsibility of business- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud” (Kallio, 2006, p. 167).
Amoralization is quite common in business today. In the case of corporate greening there are four different strategies that are used to gain moral neutrality. They are “depersonalization-the avoidance of personal moral responsibility for the environment: morality boundaries-the construction of barriers limiting the moral status of the environment; appropriation of discourse-the use of, and value attached to, certain discourses in communicating corporate greening; mobilization of narratives-the application of different narratives to make sense of corporate greening” (Crane, 2000. p. 680). According to Crane, a consequence of this is that “environmental issues were more or less constructed as amoral, due to which the environmental managers of the corporations could concentrate on ‘real’ scientific facts, and thus make rational decisions based on reason, rather than emotions” (Kallio, 2006, p. 168).
In most cases, the taboo of amoral business is dealt with at an abstract level and some would say it is trivial. The taboo of amoral business has been talked about quite frequently, often in conjunction with other concepts in an inherent way (Kallio, 2006). “Even though there are signs indicating that in the post-Enron era the CSR discourse has been reoriented to be more critical, the taboo of amoral business still awaits a more serious debate” (Kallio, 2006, p. 169).
Many people believe that business and ethics do not go hand in hand because money cannot be made if proper ethics are practiced. It is believed that a corporation that follows ethical guidelines will not reap any benefits and not be able to take advantage of opportunities as they arise. It is only a few corporations that choose to practice unethically and illegally. They tend to give a bad name to all the rest (Kallio, 2006). In this paper I discussed business ethics, including three common misunderstandings, one major taboo of corporate social responsibility discourse, and gave examples of two major corporation scandals, Enron and WorldCom. There will always be ethical issues that come up in corporations as long as they exist. It is up to the people in charge whether they choose to follow the proper guidelines or stray another way to make some extra money.
References
BBC News. (2003, February 14). Enron ‘bribed tax officials’. Retrieved July 11, 2007 from http://news.bbc.co.uk/2/hi/business/2756345.stm
Berger, P.L., & Luckmann, T. (1966). The Social Construction of Reality: A Treatise in the Sociology of Knowledge. Harmondsworth: Penguin Books.
Business ethics. (2007). The Columbia Encyclopedia, sixth ed. [Online]. Retrieved August 2, 2007 from http://www.encyclopedia.com/printable.aspx?id=1E1:business-et
Crane, A. (2000). Corporate greening as Amoralization. Organizational Studies, 21(4), 673-696.
Crook, C. (2005, August 22). The Good Company. Economist, p. 3-4.
Ethics. (1994-2000). Encyclopedia Britannica Online. [Online]. Retrieved April 5, 2000 from http://search.eb.com/bol/topic?eu=108566&sctn;=1±=1
Kallio, T. (2006). Taboos in corporate social responsibility discourse. Journal of Business Ethics, 74(2), 165-175. Retrieved August 2, 2007 from EBSCOhost Research database (Article No. DOI: 10.1007/s10551-006-9227-x; (AN 25916948).
Lamberton, L., & Minor-Evans, L. (2007). Human Relations Strategies for Success. (Third Edition). New York: McGraw-Hill Irwin.
Schmidt, R. (2005, August 14). WorldCom’s ex-CFO Sullivan gets 5 years jail. Retrieved May 22, 2007 from http://www.stockbreakthroughs.com/articles/worldcoms-magic-trick.htm
Schmidt, R. (2005, August 9). Ex- WorldCom CEO Ebbers found guilty. Retrieved May 22, 2007 from http://www.stockbreakthroughs.com/articles/worldcom-ex-ceo-found-guilty.htm
Sims, R.R., & Brinkman, J. (2003). Enron Ethics. Journal of Business Ethics, 45(3), 243-256.
