Business ethics aims to transform companies from the standpoint of profit only to profit while achieving the ethical value of the work itself (Ferrell, Harrison, Ferrell & Hair, 2019).
In this paper, I will discuss the ethical issues raised by the Enron and Volkswagen scandals and how to reduce these ethical problems in the future.
Enron's Ethical Issues:
Enron Energy was the seventh largest company by market capitalization in the United States during the 1990s until its shares collapsed entirely in 2001 and declared bankruptcy; it was because of the manipulation of the declared earnings records (Sims & Brinkmann, 2003); according (Johnson, 2003) the ethical issues that Enron manipulated were as follows:
- Conflict of interest and collusion with analysts to present a wrong picture of the company's financial condition.
- Switch account balances immediately before quarterly reports to enhance clear profits.
- Immediately claim profits from long-term projects that may eventually lose money.
- Borrowing from affiliates with no intention of repaying the loans
- Avoiding and getting around federal taxes in every way.
- Contributing to the California energy crisis by manipulating electricity prices.
- Bribery foreign officials are needed to secure contracts in India, Ghana, and other countries.
- Manipulating federal energy policies to obtain more significant benefits than competitors.
Volkswagen's Ethical Issues:
According to Al-Ruweidi (2018), Gas emissions from diesel cars have been manipulated. This causes environmental pollution and significant damage to the atmosphere because 11 million vehicles have violated emission standards.
According to (Koplin, Seuring & Mesterharm, 2007), The ethical issues at Volkswagen were as follows:
- Defrauding the customers in the first place and selling them a vehicle affects their health and environment.
- Bypassing the laws and legislations of countries that have signed the emissions law and reducing environmental pollution.
- Manipulating stockholders' money causes significant damage to the company's share price and consequently directs losses to stakeholders.
- The CEO and the President bypassed the Board of Directors and the Supervisory Board by not informing them of the matter of manipulation.
- Refrain from using certain people, such as quality officials in the company, without taking responsibility for issuing orders to them to implement.
Reducing These Ethical Issues:
For what can be done in the company itself, several bylaws are required to monitor and address ethical issues, including an ethical charter upon which the company operates. Its management does not violate it, and it is a constitution for it, confirming an administrative body that monitors this relationship and assures the proper progress of the supervisory work (Giacalone & Thompson, 2006). The Sarbanes-Oxley Act has taken on the federal task of managing these issues and preventing them from happening in the future.
Conclusion
Always and forever, no matter how successful a company is, if it does not take ethical issues into account from the outset, it will veer off course and be disrupted sooner or later. Companies' sustainability is achieved by considering the interests of people, society, and the surrounding environment; it happens in parallel with the consideration of making profits.
References
Al-Ruweidi, M. (2018). Case study: The Volkswagen emission scandal. ResearchGate.
https://www.researchgate.net/publication/323998958_Case_Study_The_Volkswagen_Emission_Scandal
Ferrell, O. C., Harrison, D. E., Ferrell, L., & Hair, J. F. (2019). Business ethics, corporate social responsibility, and brand attitudes: An exploratory study. Journal of Business Research, 95, 491-501.
Giacalone, R. A., & Thompson, K. R. (2006). Business ethics and social responsibility education: Shifting the worldview. Academy of Management Learning & Education, 5(3), 266-277.
Johnson, C. E. (2003). Enron's ethical collapse: Lessons for leadership educators.
Koplin, J., Seuring, S., & Mesterharm, M. (2007). Incorporating sustainability into supply management in the automotive industry–the case of the Volkswagen AG. Journal of Cleaner Production, 15(11-12), 1053-1062.
Shaw, S., & Barrett, G. (2006). Research governance: regulating risk and reducing harm?. Journal of the Royal Society of Medicine, 99(1), 14-19.
Sims, R. R., & Brinkmann, J. (2003). Enron ethics (or culture matters more than codes). Journal of Business Ethics, 45(3), 243-256.