An Ethical Analysis of the Enron Scandal

The Enron scandal is one that left a deep and ugly scar on the face of modern business.
As a result of the scandal, thousands of people lost their jobs, some people lost their
entire pensions, and all of the shareholders lost the money that they had invested in the
corporation after it went bankrupt. I believe that Kenneth Lay, former Enron CEO, and
Jeffrey Skilling behaved in an unethical manner without any form of justification, but the
whistleblower, former Enron vice president Sherron Watkins, acted in a way that upheld
moral principles.
I can understand Jeffrey Skillings motivation, since money and greed are very
powerful forces, occasionally driving even the most honest individuals to commit
horrible acts. I might understand a destitute individual committing a dishonest act in
order to feed themselves or their children, but Jeffrey Skilling was by no means destitute
and had no just cause to even consider deceptive accounting. Personally, I am constantly
faced with situations where it is possible for me to be dishonest and steal expensive items
from the company I work for, but I choose not to since these things are needed by the
company and are owned by the shareholders. I believe that I have no right to steal
anything since I am living very comfortably, with respect to most humans, and I am
satisfied with my economic position. If Jeffrey Skilling had looked at the Enron situation
from a perspective similar to mine, he probably would not have seen any reason to do
what he did.
Sherron Watkinss actions, in my opinion, were perfectly orchestrated in a very ethical
manner. She noticed something suspicious about the accounting, so she took a closer look
and did not just ignore the problem. When she realized the depth of the situation, she
reported it to the people that could do something about it in the organization, even
reaching the top man, Kenneth Lay. When the company refused to correct the situation,
she went to the media, which forced the problem to be fixed by causing shareholders to
dump their investments in Enron. In her memo written to Kenneth Lay, she expressed
concerns that her 8 years with Enron would not be worth anything after the scandal, but
she went ahead anyways despite these fears about her future employment.
Sure, people lost their jobs and pensions when the news came out, but that was not the
fault of the whistleblower. It was the fault of those who forced her to take the story
outside of the company. It was Jeffrey Skillings fault in the first place that the unethical
accounting was being done, but the company could easily have fixed the problem
internally without going bankrupt. If Kenneth Lay had actually done something about the
problem, share values might have gone down after the corrected financials came out, but
the company would probably have survived. I have seen companies in far worse

situations reverse their fortunes by replacing management and making their processes
more efficient.
I think that whistle blowing is a very courageous and selfless act, since it exposes the
person to economic, personal, and sometimes physical attacks. I am reminded of the story
of Jeffrey Wygand, a tobacco company scientist, who blew the whistle by declaring that
tobacco company executives knew about the dangers of smoking and considered
cigarettes nicotine delivery devices, but did not care about the health problems caused by
smoking. After blowing the whistle, he was threatened by his company, fired, and
followed by unknown people for quite some time afterwards. I have never blown the
whistle personally, but I can easily see how dangerous it would be, given the vulnerable
situation that it places the person in.
Although I think that Jeffrey Skilling should be given the most blame for the corruption
at Enron, that does not mean that Kenneth Lay is not deserving of some blame for what
happened. He was the lead figure at the corporation and he should have been watching
the accounting to make sure that no illegal actions were being taken by the employees.
Sure, he might not have had an accounting background, but he could have hired
independent consultants to look at the financials and make sure that nothing unethical
was being done. I might have been able to give him the benefit of the doubt if the
corruption was very far down the chain, but accounting is very closely related to upper
management (in most businesses) and Skilling seemed to be someone that Kenneth met
with frequently.
As the leader of a publicly-held corporation, a CEOs foremost duties are to produce a
profit for shareholders, a responsibility which Kenneth Lay might have followed in the
short term, but not in the long term. Sure, some shareholders might have made a return on
their investment if they sold their stock before the collapse, but all of the long term
investors who were loyal to the company ended up being punished for that loyalty.
Kenneth Lay betrayed the shareholders through deception and lack of foresight into the
consequences of Enrons accounting practices. A CEO is also supposed to care for the
people who work for him by giving them job security and benefits, but Kenneth Lay
ultimately failed in this area as well since his inaction ended up costing most of them
their jobs and pension funds invested in company stock.
The actions of Kenneth Lay seem to be those of a manager who does not care about what
his sub-managers are doing as long as the machine is running smoothly and profits are
rolling in. When the whistleblower informed him of the suspicious activities of his
underlings, he decided not to do anything about the situation. Instead, he forced the
whistleblower to go outside the company and caused the resultant financial collapse of

Enron.
I think that a manager needs to at least question the actions of people under them in order
to ensure that a company or organization is behaving in an ethical manner. A manager
who does not manage often becomes a mere puppet, providing a clean faade for a
possibly corrupt and evil organization.
I think that if Kenneth Lay and Jeffrey Skilling had applied the Kantian concept of
reversibility, and asked themselves how they would feel if their employer betrayed them
and caused them to lose their life savings, they would have acted differently. I believe
reversibility is one of the best ways to evaluate the ethicality of decisions since it forces a
person to think about what the other person feels like. Part of their punishment should be
to spend time with the victims of their actions to see the effects that the Enron collapse
has had on them.
It is also interesting that Kenneth Lay grew up in poverty, but he was willing to throw
away all of his progress just to make some extra money. Since he came from a humble
background, I would think that he would have been able to better empathize for the
common man and the lesser-paid employees of Enron. However, it appears that his
success excessively inflated his ego, causing him to turn down President Bushs offer to
make him secretary of commerce since it was below him.
In conclusion, I find that the actions of Kenneth Lay and Jeffrey Skilling were clearly
unethical and not justified by need. The whistleblowers actions, on the other hand,
were very ethical and represented the selfless things that human beings are capable of
doing. It is very unfortunate that the Enron situation occurred at all, but it is fortunate that
it was exposed in a somewhat timely manner and the people responsible are being
brought to justice.