Ethics in Business

Enron : A case of ethical fall

Information asymmetries ' is that form of market failure in which the level of information at the two ends of a business is different . In most of the cases , the business decision-maker is the one who knows something that has been divulged to the person present at the other end of the business process . Though these instances have not been considered as bad but in some circumstances the above mentioned asymmetry moves from a case for simple competitive advantage to an instance that offends the rights of

person who is at the other end of the process . This ultimately diminishes the effective nature of the free market (Berenbeim , 2006

Enron 's action had been similar to the one mentioned in later parts of the above paragraph . The company was found in practicing several instances of insider trading while taking the flexibility of information asymmetries beyond limit (Tracinski , 2002 . The company board departed from the company 's own ethics code requirements and get along with strange policy in which it entered into general partnership with the company 's CFO . Generally , company executives irrespective of the post and designation don 't have to observe any fiduciary duty to the company or its employees but can own its shares . Also , the CEO was found making public statements related to future growth in the shares of Enron and at the same time was selling its stock . The above mentioned sale of stocks was for repaying the money that the CEO was owing to Enron . All these issues clearly point to the unethical practices of Enron top management As per legal discourse , Enron authorities were far from the state that would be termed as alert to above mentioned instances . The reality may relate to the possibility of top management getting benefitted from this information asymmetry (Berenbeim , 2006

Corporate governance and the associated system are quite necessary for ensuring better performance of the whole corporate entity so that shareholders interest remains ensured . Understanding the theme of this corporate governance in the present scenario , it can be defined as a system of time bound and periodic check and balance designed in such a way ensuring that the corporate managers has been made accountable on behalf of long-term shareholder and the value of their own money or investment and associated risk . Basically the process is meant for reestablishing the fact that it 's the shareholders who are the real owner of the firm and are being represented through an elected board of directors . The CEO and other officers and subordinate managers being appointed by them for overseeing different sections of the firm are basically employees are compensated accordingly . Any discrepancy on this philosophy is more or less creating debacle and loss of fundamental structure and as well firm 's performance . The scandals like the one that happened in Enron are a very clear case of top management of the firm undermining the interest of shareholders and several junior employees The rise in instances...