Corporate Social Responsibility and the Law - Case Study Example

Corporate Social Responsibility and the Law Enron Corporation started in the year 1985, was an energy company that was found Houston, Texas. It was formed by two companies that merged together. The two companies were involved in trading of natural gas. It was involved in malpractices that are prohibited in its transactions. The corporations collapsed due to fraud and corruption. It had employed more than 20,000 people by the year 2000 (Kerns, 2005). By then, there were very good strategies that were applied in accounting and this made it to be ranked among the top ten largest companies in the United States. From the previous trend that was recorded by the company it was anticipated that it was to dominate in business transactions it carried out. It had very a milestone in such transactions whereby it had conducted trade in weather preparedness and security, power and communications. In contrary to many expectations and hopes of the people of the United States and the world at large, it turned to be a legend in failure that is outspoken up-to-date. Policies are a set of principles of action adopted or proposed by an organization. They are tools of management whose absence leads to consequences as severe as the collapse of the organization. Business organizations run on a primary objective of maximizing profitability (Yong, 2009). However, in doing this it is understandable that the organizations exist within the society and must therefore operate in accordance to the norms of morality and ethical provisions as set by the society. The organizations interact with the society on their everyday production endeavors, some of the key modes of organization- society interaction include, the recruitment of personnel. The collapse of the company apart from recording the highest form of bankruptcy has triggered a myriad of unanswered questions and behind the bar scenes that ought to unraveled to help in implementation of preventive mechanisms in corporations of the same type, to deter occurrence of such incidences. This historical happening contradicts the code of ethics of the corporation. Most of its ethics were easy to be followed and almost all the employees conformed to them. In case of misunderstanding and disagreement the legal committee or the supervisors were to be contacted for clarification. Enron had policies which were implemented under the supervision of the management board. The policies included the principles that protected human rights. The policies clarified further on the secrets of the company concerning trade businesses and information that was supposed to be censured hence be kept as confidential information. There was also provision of additional information on the penalties of workers who misbehaved. The core values of the company were excellence, communication, integrity and respect. In excellence, their aim was to produce the best and to progressively move from where they have been before. There major purpose in communication was to ensure that there existed smooth flow of information among people. They were supposed worked with people in an open, sincere and faithful way in fulfillment of their integrity. Moreover, the company was supposed to treat everybody with in a human way. According to the company’s manual, ruthless treatment, arrogance, abuse and disrespectful handling of people was prohibited. The manual of their codes of conduct that was delivered to all workers stated that; the company was working hard to ensure that all the business transactions are conducted in accordance with both local and international regulations. The section clearly emphasized that the company was to observe the act of free corrupt practices of the United States, but this was not the case. Unfortunately enough, from the findings these codes of conduct and policies were only put only on papers, manuals and booklets to show to the public and the regulating authorities that they are existing in the company. Coming to the practice and transactions, contradicting businesses existed that unluckily led to the demise of Enron Company that had gained popularity in America and the world in general when it existed. Some findings state that record of bankruptcy that Enron Company hit and its extinction was attributed by the unethical behavior of the corporate. Generally, it was due to the fact that it was unable to mitigate and control the sporadic growth of the greed conducts and vices of the corporate. Some speculate that, accounting department was not transparent to bring into the open misuse of funds and show the financial debts of the company. In different attributions, some people say that it was due to the fact that risk was not managed in a proper way and resources of the company were overextended, together with critical differences that were among the leaders and stakeholders of the company. This might be the primary explanations why the corporate became bankrupt and eventually closed down. Despite all these explanations from various bodies and people concerning the extinction of Enron Company, it remains a riddle to be unraveled yet on how the corporate rose with a very short duration of time with its business activities (NISKANEN, 2007). In comparison with other companies that conducted the same business such remarkable growth that was seen at Enron was not witnessed anywhere. This unique has triggered a myriad of speculations concerning the legality of the operations of the Enron. According to studies that were carried out Enron found itself bankruptcy by investing in projects that were very risky and from the result, it was impossible for the Corporate to respect all the debt obligations that they were supposed to honor. Another risk factor that made Enron to be bankrupt in the history of the United States was non standard accounting procedures and policies that drove it into such scandal. The abuses explained were only a symbol of the dangerous problem that arose in the corporate. The crucial problem that led to the downfall of Enron was the contradicting philosophical managing systems that operated the company. The managers were completely to harmonize the managerial systems to have one system. Immediately after the resignation of the president of Enron, Richard Kinder in the year 1996, there was implementation of two systems of leadership that totally different. The two managerial dimensions jeopardized the operations of the company. The conflicting management strategies were brought by Rebecca Mark and Jeffrey Skilling (SWANSON & FISHER, 2011). Mark intensified his strategies overseas in foreign countries like India, Canada, Argentina and Britain. As intended, most of Mark’s projects did not provide profits that were long term. Despite all these, mark and people that were employed under her continued to earn millions of money that were almost equal to the compensatory advantages from developing these transactions. With time these projects failed overseas and some few people were aware but there was no step taken. The company was greatly indebted by the projected that failed in overseas countries. According to sources, the failure of Enron Company was as a result of failed projects in overseas, before the scandal of accounting came in. the two managers violated the policies of the corporation by not harmonizing their managerial and business strategies before they were implemented to in the transactions. It like there was no proper communication between the hence the company was running in two different dimensions. This was a form of disrespect that existed between the two leaders that against the governing policies of the company. Highly ranked employees of Enron in both Camps took the advantage of claiming to complete the non paying projects hence demanded for very huge amount of compensatory money. In many occasions there existed trade transactions and accounting techniques that were questionable. There were no clear guidelines that were to be used in evaluation of the success of various projects of the company. The lack of monitoring and evaluation technique created loop holes for some people to claim payment of projects that were unsuccessful. Happening in the corporation were some illegal schemes that were conducted with the full knowledge of the management. The policies of Enron Company did not allow such illicit vices but the managerial board went ahead deployed some people to conduct in favor of the company not knowing that they jeopardizing the future of the corporation (Zhao, 2011). One notable gross mistake that was done by one the financial officers was creation of some prohibited schemes that meant to hide the huge debts of the Company and this gave the Corporation serious setbacks. Together with the infighting differences between the mangers and accounting scandals that were brought into public in the year 2001 brought down Enron Company. The differences in interests of the board of managers and the greed that was ever sky rocketing in the company created a good environment for the problems to develop to maturity to cause an impact that totally killed the company. If there was unity and transparency such activities that made Enron could have prevented at tender emerging stage. All the misconduct that were seen in this company can occur in any company and are preventable by use of policies like the ones that were elaborated in the policy manuals of Enron Corporation. This shows the failure of the management as prime cause of the extinction of Enron Corporation (Gilliland & James, 2013). There are theories that can be applied in explanation of the failure of the governance of Enron and they include transformational and trait theories. In the case of Enron Company, the leadership strategies that were used were extreme to the extent that good traits and qualities were sidelined. Everybody was zealous such that they both wanted their ideas to be implemented without considering the ideas of the other part. In that leadership of Enron, integrity which is among the core values became a non factor. Lack of integrity in the corporation became one of the major hindrances in development. Within the organizational structure and the cultural practices of the company there was a serious mess that existed. There was honest disclosure on financial status and activities of the company. This behavior accelerated the greed practices where people self interests without considering the future of Enron. Another gross mistake was done during done during the time of transformation of leadership whereby the plans of the new leaders were critiqued and harmonized before they were employed as the new managers of Enron Company. In brief, integrity of employees at the organization is the key influencer of the financial performance of the same. Integrity affects every aspect of human life. A business organization such as Enron should safe guard its operations by maintaining a highly integral work force (Culp & Niskanen, 2003). The integrity of employees is safeguarded by the policies governing the operations of the firm. Lack of effective policies to elaborate on the employee behavior and the punishment of wrongdoing resulted in the development of a relaxed working environment, one in which accountability was never withheld. The managers therefore easily misappropriated the resources of the company well aware of the absence of the responsibility mechanisms. References CULP, C. L., & NISKANEN, W. A. 2003. Corporate Aftershock the Public Policy Lessons from the Collapse of Enron and Other Major Corporations. Hoboken, NJ, John Wiley & Sons. GILLILAND, B. E., & JAMES, R. K. 2013. Crisis intervention strategies. KERNS, C. D. 2005. Value-centered ethics a proactive system to shape ethical behavior. Amherst, Mass, HRD Press. NISKANEN, WILLIAM A. 2007. After Enron Lessons for Public Policy. Rowman & Littlefield Pub Inc. SWANSON, D. L., & FISHER, D. G. 2011. Toward assessing business ethics education. Charlotte, N.C., Information Age Pub. YONG, L. P. 2009. Lessons in corporate governance from the global financial crisis. Sydney, CCH Australia. ZHAO, Y. 2011. Corporate governance and directors' independence. [Austin, Tex.], Kluwer Law International. Read More