Business Law, Ethical Issues, Case Study Example

Enron’s Case Study

Arthur Andersen was already aware of the reigning problems in the financial and accounting statements. In order to hide these problems, he failed to make the necessary changes in the earnings release; thus, failing to show the true reflection of the organization’s financial position. As a result, he faced charges for failing to report the correct information thus deceiving the users of the information. David Duncan knew about the existing situation. However, he aided Andersen in hiding the true financial reflection of the organization, and destroying financial information in order to hide the inconsistencies in the information. Temple faced the same as Duncan since he took part in misrepresentation and the hiding of the correct information (Jennings, 2009).

According to the Park case, it was held that “respondent was on notice that he could not rely on his system of delegation… he must have been aware of the deficiencies in his system” (p. 248). SEC’s inquiries about the organization’s financial information showed the managers that there was a problem somewhere. Kenneth Lay’s evasion of inquires shows that he may have known about the existing problems. The managers (Temple and Duncan) were criminally liable for the shredding. They actively took part in the shredding because they ordered the employees to shed the documents through the circulating policy. Lay was responsible also liable because he knew of the existing problems and so he ought to be aware of the measures taken in order to “correct” the situation. The employees were liable because they actively took part in the shredding by shredding the documents. It is evident that they had some understanding of what they were doing was unlawful even though they were acting on orders. The people act on behalf of the organization. Interfering with financial information in order to make a false reflection of the same is unlawful with or without the notice (Jennings, 2009).

Outlawed Products

Dumping unwanted products in the United States into the third world is unethical. One can analyze the ethical issue in this case by using the front-page-of-the-Newspaper test. This approach encourages managers to visualize how a critic such as a reporter would put their act in a headline. It encourages managers to think of the worst possible headline that this reporter would use and the effect the headline and the information below it would have on the organization. In this case, a reporter might put a headline reading “Hundreds of Thousands Die, as a U.S Company Makes Billions in Revenues”. Such a heading will attract the public to read the content below the heading. In most cases, the reporters bring forth the required information in order to make the public sympathize with the victims while painting a negative picture of the organization in question (Jennings, 2009).

In the Salomon Brothers crisis, the reporter made follow-ups years later thus, refreshing the public’s memory. In each follow up, a negative picture of the company was brought forth. This had a negative impact on the company’s general performance. Most organizations intend to trade in the global market. If a manger is willing to propel his organization into the global market, he should make decisions, whether ethical or otherwise, that should not make such inappropriate headlines. Companies like associating with the society are a positive way, but such negative information attracts negative responses, which makes a negative impact on the revenues. This approach is the best for undertaking such an ethical issue.

Reference

Jennings, M.M. (2009). Business: Its Legal, Ethical, and Global Environment, Ninth Edition. Mason, OH: Cengage Learning.