IntroductionSince 2001, the business world has weathered scandal after scandal. Again many ethical problems had aroused people’s attention again. Is business ethic? Why is business ethics important? How to improve ethics in business world? According to Enron’s case, I will focus on the business ethic problem and discuss it in this essay. What happened in Enron?According to the case of Skilling vs. United States in the Supreme Court of United States, as a big energy trader in the world, Enron ranked as the seventh revenue grossing company in the United States.Jeffery Skilling, a long-time chief executive officer of Enron, resigned in August 2001. Less than four months later, Enron crashed into bankruptcy, and its stock plummeted in value. After an investigation through which uncovered an elaborate conspiracy to prop up Enron’s stock prices by overstating the company’s financial well-being, the U.S. Federal Government prosecuted dozens of Enron employees who participated in the scheme include Skilling and two main executives in Enron. Count 1 of the indictment charged Skilling with, inter alia, conspiracy to commit“honest-services” wire fraud, by depriving Enron and its shareholders of the intangible right of his honest services. Skilling was also charged with over 25 substantive counts of securities fraud, wire fraud, making false representations to Enron’s auditors, and insider trading. [1] (SUPREME COURT OF THE UNITED STATES, p1)Justices’ decision and honest-service statuteSkilling appealed the decision which was made by the court and raised two questions after the voir dire in 2006. First, he felt that he acquired an unfair trial under pretrial publicity and community prejudice. Second, he asserted that it is improperly for jury to convict him conspiracy to commit honest-services wire fraud.According to the jury’s conviction, Jeffery Skilling committed “honest-service” wire fraud. However, the case expresses: “in proscribing fraudulent deprivations of the intangible right of honest services, according to 18 U.S.C.S. § 1346, Congress only intended at least to reach schemes to defraud involving bribes and kickbacks”. [2] (SUPEREME COURT OF UNITED STATES, p 1) Based on this aspect, Skilling appealed. But his claim was rejected by the Court o Appeals because“it did not address Skilling’s argument that the honest-services statute, if not interpreted to exclude his actions, should be invalidated as unconstitutionally vague”. [2] (SUPEREME COURT OF UNITED STATES, p 1)According to Justice Ginsburg’s decision, honest-service statue should be in part advocated in Skilling’s case because proscribing fraudulent deprivations of “the intangible right of honest services” should be at least included in bribes and kickbacks. However, Skilling did not do the fraudulence as this. Justice Ginsburg’s opinions are as follow:We disagree with the Fifth Circuit’s honest-services ruling. In processing proscribing fraudulent deprivations of “the intangible right of honest services,”§1346,Congress intended at least to reach schemes to defraud involvingbribes and kickbacks.Construing the honest-services statute to extend beyondthat core meaning, would encounter a vagueness shoal. Construing thehonest-services statute to extend beyond that core meaning, we conclude,would encounter a vagueness shoal. We therefore hold that §1346 covers only bribery and kickback schemes. Because Skilling’s alleged misconductentailed no bribe or kickback, it does not fall within §1346’s proscription. Wetherefore affirm in part advocate in part. [2] (SUPEREME COURT OF UNITEDSTATES, p 1)Ethical discussionAs the Enron scandal wore on, many other companies such as WorldCom, Xerox, and Merck collapsed and became financial scandal as well. As the question mentioned at beginning, is business ethical? A survey of high school students conducted by Junior Achievement and Deloitte Touche found that only eighteen percent believe business leaders are ethical. [3] (M.Jennings, p 32) That is to say, it is time for the business field to improve their ethical level, in order to rebuild their image. However, is it necessary to do this? The answer is absolutely “yes”and the reasons are as follows:First one is cost of unethical behavior. Companies would lose their customers if they are not responsible. It costs corporations a huge amount of money and time to rebuild their reputation. Nestlé is probably a good example. From the 1970s to 1980s, Nestlé promoted infant formula in baby milk with misleading and harmful strategies that violated the International Code of Marketing of Breastmilk Substitutes and put babies at risk. A Nestlé boycott was launched at that time all over the world,especially in the U.S. In order to continue business, headquarter decided to recall the entire harmful baby milk in the less economically developed countries where their breast milk substitutes were sold mostly. And set up the independent Nestlé Baby Milk Product Review Committee. Through these sincere efforts, slowly, Nestléacquired people’s confirmation, and in 1983, the United States Teachers Unions, the biggest organization in the boycott, repealed the boycott to Nestlé’s products. However, Nestlé expensed huge amount of money to communicate with the public and improve their products annually during that period. The same situation in Enron, but the cost of the unethical behavior for Enron is bankruptcy. So cost is the first reason for a company to be ethical. [4] (The Internet Classics Archive. Web Baby Milk Action)Second is impact on reputation. Reputation or goodwill is the determinant element of a corporation, although it seems ridiculous to some business people. A company with a high reputation can absorb more and more customers and occupied more market shares to maximize their profit. In contrast, low reputation company not only cannot maintain their current customers and market shares, but loses them and even goes into bankruptcy. Because of overrating the financial well-being, Enron’s stock was popular among stock agencies and was highly recommended as well. However, after the investigation, Enron’s share plummeted. Enron lost credit to their shareholders who sold their stocks crazily in the four months. From ninety dollars, the highest share price, to pennies per share, shareholders’ wealth shr ank heavily, and some people fell. Enron’s reputation fell to zero or even negative with the falling of itsstock price, although it is not reasonable to measure by numbers. In general, reputation is the most significant element of a company even the whole business. How to maintain relatively high reputation? The answer is quite simple: behave ethical.Finally is reputation’s impact on the business world. As we mentioned above, unethical behavior impacts on the corporation’s reputation which is important to a company. On the other aspect, one company’s scandal especially the leading enterprise’s can probably raise the crisis of confidence in the whole industry. As an energy trading enterprise, Enron’s business is constructed in the credit basis. That is to say, energy suppliers and consumers sign contracts through Enron, and promise to fulfill the obligation in several months. So the reputation is tremendously important to companies in this industry. Enron’s collapse brought significant impact on the “Energy Trading” industry. Suppliers and consumers can hardly trust these media companies after the scandal happened, and they may probably find another safer way to sign contracts. In general, Enron’s mistake may possibly lead to the depression of the whole “Energy Trading” industry.According to the reasons, unethical business behavior raises the cost of companies, lost reputation and even reputation of the certain industry, whichever problem can lead to a bankruptcy or even the crisis of economic. So it is time to emphasize ethic in business field, but according to Enron’s case, what should be comprehended to avoid unethical behavior in company? How can an enterprise enhance their ethic and culture?Ethics begin at the top of a company. A business must have from its board and itsCEO a commitment to earning a profit within ethical boundaries. In Enron’s case, Jeffery Skilling, the company’s CEO, and many members in the board of supervisor set up their private companies and do business with Enron ( inside trading). They achieve large amounts of liabilities for Enron in their own companies’ name, in order not to disclose them in Enron’s balance sheet. In conclusion, these officers deceive the public without any social responsibility by overrating Enron’s value to make the stock price go up and up. As presented in the beginning of the section, ethics begin at the top of a company. That is to say, leadership’s ethical culture has important implication to employees and even the whole enterprise. So it is necessary to enhance the tone at the top. There are four keys to a company with a good ethical culture [3] (M.Jennings, p65):First of all, establishing written standards of conduct; this method can help companies manage their employees more effectively, and remind employees what behavior is ethical in the company, if a person does not follow the regulations on the wall; he/she would get sanctions and terminations due to unethical behavior.Second, proceeding ethic training for both employees and the top managers; ethics can be strengthened in both employees’ and executives’ mind in this means.Third, funding ethics advice lines or offices, is a minimum requirement for companies in the post-Sarbanes-Oxley era. In order to encourage employees to report problems, companies may develop tools or hotlines to heighten employee awareness of ethics and encourage them to raise concerns. [3] (M. Jennings, p66) Forth, completing systems for anonymous reporting of misconduct; companiescan develop an anonymous system to encourage employees reporting problems or ethical dilemmas they faced because there may still be fear and concern that their jobs are at stake. Companies can also set up some award fund to inspire people to do so.In other aspect, companies need to set a reasonable reward system to pay both their employees and top managers. According to Enron’s case, Enron pays large amount of its stock options to executives include Skilling. This method indeed encourages officers to work hard, but in the other hand, it led to Enron’s collapse indirectly. Ethic is so vulnerable when interest is taken for priority; in order to make huge profit from the soaring of the stock price, Skilling and some other executives deceive the public by manipulating Enron’s financial reports. It is significantly important to establish a healthy method to pay employees with a reasonable amount of stock options.ConclusionIn nowadays, after scandal and scandal, business field is undertaking unprecedented ethical pressures. It is time to rebuild public’s confidence and enhance ethics in business. In 2004, after Enron’s scandal, Sarbanes-Oxley was implemented by American stock market, which is the severest regulation in recent decade, and it focuses on enhancing public enterprises’ internal control. Although it is difficult time for business field, there are reasons to believe that the situation can be better and better by everyone’s efforts.Reference[1] SUPREME COURT OF THE UNITED STATES. SKILLING v. UNITED STATES. CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT[2]SUPREME COURT OF THE UNITED STATES.JEFFREY K. SKILLING, PETITIONER v. UNITED STATES ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT. June 24, 2010.[3] Jennings, Marianne. Business: Its Legal, Ethical and Global Environment. Cincinnati: West, 2006.[4]/aboutus/aboutus。
