If the board of directors refrained from hiring Skilling and kept ethical characters such as Segnar, Enron would have flourished accordingly within the natural gas market. It would have allowed competitors to ascend and for their profits to be translucent, without pursuing mark to market accounting. Societies and markets such as India and Argentina, among others, would not have experienced the losses instigated by Enron’s executives. Other communities such as California would not have been significantly impacted by gluttonous decision making. California’s economy would have been more stable then and possibly in a better position. If Davis would have remained governor, the electrical market would not have fluctuated as much as it did under Enron’s control. If Enron abided by the law, numerous partnerships with real economic value would have been established. Skilling decided to resign at a terrible time. His self-interest in this case did not improve Enron’s reputation.
Hiring ethical executives and keeping accounting transparent would not have opened the door for wild claims and promises raising false hopes. Enron’s investment in broadband technology that caused stakeholders and investors to inject lump sums of money into a non-existing market. By not firing Mastroeni and Borget for gambling with the company’s funds and after being criminally charged, Skilling’s actions set a low precedent for unethical behavior. However, one must note that due to Enron’s behavior, we now have an American society that functions under stern and strict accounting rules after the implementation of the Sarbanes-Oxley act, which protected investors from fraudulent accounting by companies (Investopedia Staff, 2018). Enron was an example to be set for future generations of the free market.
For Enron to have sustained its more ethical and successful trajectory, they could have tried a variety of business practices. Utilitarianism is when a decision maker satisfies the entire society, and everyone dealt with. Actions must be considered because they impact society (2015, Mallor). Benefits must outweigh the costs before action is taken. A Utilitarian would have expanded globally just like Enron did. They would have traded vastly in Enron Oil because that would lead to healthy relationships with third world countries. These relationships would not only have generated a profit for US businesses, but also allowed the US to invest in their economy. This speaks to the essence of the utilitarian concept. Ethical accounting must be kept in mind to avoid a mishap like the one exposed by Borget. A utilitarian would not have done anything to hurt the American society including California. By the same token they wouldn’t have done anything to weaken relations with foreign economies. A utilitarian would not have offered false business plans promising success when the venture is unknown. The benefit of exploring in foreign markets would have yielded greater profit if everything was transparent.
Another approach includes profit maximization. Profit Maximization is disguised capitalism and centered between results and the generation of profit. In the US more than 75% of the wealth is owned by less than 10% due to this concept (2015, Mallor). A Profit maximizer would act similarly to the way Enron behaved. They too, are after the betterment of the American society, but with disregard to how funds are allocated. However, their main goal is to produce the furthermost long-term profits for the company within the limits of the law. Enron, disparately, attempted to produce the greatest long-term profits with no regard to the law. The difference between Enron’s choices and the choices made by a profit maximizer is that the latter would not have offered false promises to their stakeholders. They would keep promises constant with the state of the market. All Enron decided to do was project false profits due to the subsidies they had access to and the mark to market accounting method they eventually adopted.
Fundamental rights are protected through the rights theory. A rights theorist strives to avoid violating the codes of the market. These rights consist of life, liberty, and property (2015, Mallor). Every single member of society has a right and they are responsible for not harming others’ rights. The concept may seem non-ideal due to disagreement between individuals and some rights might be restricted and unknown. For example, California would not have been impacted by the 1999 to 2001 power outages, and the sale and trade of that energy with prior knowledge was violating the community’s rights. A rights theorist will also take immediate action towards law breakers and those who abuse accounting methods. A rights theorist will respect the workplace and will provide all the necessary documents to prove where the cash was flowing to and from. Unlike the rights theorists, Enron violated human rights by consistently double-dealing and encouraged returns that were never delivered. A rights theorist would not have promised Merrill Lynch, a major Enron investor, a certain return that he or she is uncertain of. Furthermore, a rights theorist would have supported Davis, the former governor of California, in aiding the Californian community by providing the necessary funds to resolve the power outages. A mark to market accounting method may also not have been adopted due to its lack of transparency. Traditional accounting methods, such as the traditional costing system, would appeal to a rights theorist.
According to John Rawls, the publisher of the book A Theory of Justice, governments should allocate wealth to help the poor and disadvantaged. Fairness and neutrality should be the leading factors of corporations (2015, Mallor). A justice theorist would make decisions that would consider the distribution of wealth. A justice theorist primarily would not have allowed any activity such as writing false checks and gambling in the oil market. A justice theorist would not motivate an individual to gamble with the company’s assets and profit from that. They would correspondingly avoid stripping other markets of their natural resources. Investments in those markets should have been prioritized over the control and extraction of resources. Decisions to invest in certain markets would have to consider who and how will the community or the market impact. They would not have opened a power plant in India knowing well that India’s economy is unable to sustain or supplement that amount of energy. An ideal alternative would be to minimally invest in one of India’s leading energy companies. Depending on their success in that investment, a decision to operate their own plant should be taken to avoid needlessly draining the market.
If everyone behaved the way Enron did, chaos would emerge in the free market. Ethical values would cease to exist, as no one would be held accountable for their actions. Behaving similarly to skilling, Lay and the executives responsible for the collapse of Enron would lead to the collapse of the free market. With the use of mark to market accounting Enron was able to write off massive losses. They soon ordered the destruction of financial documents that exposed these losses. Enron went on to claim a billion dollars in losses. Later, they had no choice but to admit that they were deliberately inflating income and revenue (Segal, 2018). Fortunately, laws and regulations have been put in place subsequently to minimize such individuals from dominating the market. Such laws include the Sarbanes-Oxley Act. This act increased penalties for corporate wrongdoers and established rules designed to deter and prevent any future wrongdoing. The purpose was to promote ethical and social responsibility. All of us from time to time fail to do the right thing, however to a certain extent and not at the value of others. Everyone cannot, fortunately, behave the same way Enron did. Accounting methods must be met, and the balance sheet, income statement, and cash flow statement must abide by the GAAP. Capitalism encourages innovation and efficiency. Consumers are provided a free choice of products with capitalism. However, the exploitation of the consumers and monopolizing the market are conceivable (Pettinger, 2017). I believe many more wars would result between economies and rivalries would emerge from powerful individuals if deceit was the root of a company’s success. One lie succeeds another and the lie that precedes that must be greater to cover up the initial lie. An inevitable collapse of the economy and possibly a recession would occur if the whole world behaved the way Enron did.
The practical constraints would have impacted the success rate of Enron, such as moral judgements. We must remember, that Enron’s success was manufactured and artificial due to unethical business practices. If the law was abided and traditional accounting took place many of Enron’s investments and trades would not have existed. Ignorance and greed were also major constraints. The obsession with generating colossal income at the expense of the investors took over any moral conduct and integrity of certain individuals.
The ideal alternative would be to keep Segnar as CEO and that would support the Justice theorist. The distribution of wealth would have been allocated to all parts of the company. The introduction of everyone after Segnar seemed to slowly but gradually erase all ethical factors from Enron’s decision making. They must realize that they have a responsibility towards society and even a greater one towards their stakeholders. Guidelines need to be present in corporate decision making. Being honest towards the stakeholders develops trust. That trust will one day evolve into loyalty and perhaps bail a company out of a financial situation. Financial losses, if ethical, can always be redeemed. However, when lying about earnings, sympathy and understanding would be difficult to earn. Every person has an equal right to basic liberties. For no reason should these rights be violated in favor of profit. The rights of Californians, other governments and stakeholders were violated on a major level by Enron’s decision making. Segnar and the justice theorist support the protection of those who are least advantaged in society in Enron’s case.
Visionary Writing 