Introduction

The term ethics has broadly been defined as the study of what is morally good or bad or rather
right or wrong. It has also been referred to as the moral philosophy. 1 Essentially, the discipline
of moral philosophy concerns itself with the character, responsibility and obligations of an
individual. It also seeks to analyze on the rules that govern conduct of human beings with
reference to the individual in question. Further, the discipline is applied to any system or theory
that regulates moral values, norms and principles. The philosophy interrogates several areas of
human life and conduct in life generally.2

On the other hand, business ethics has defined widely to refer to the study of what is right and
wrong and moral obligations as far as the field of business is concerned. 3 It generally deals with
the study of how business should conduct itself and the transactions it enters into. In other words,
it is ethics of professionalism or personality within the confines of business environment. The
principles that are of eminence to business ethics include: principle, reliability, trust, choice,
behavior, relationship and morality amongst other virtues and values. 4
various theories
undergird the thematic area of business ethics. These theories are: utilitarianism, deontology and
virtue ethics theories.5 All these theories seek to have an explanation on the moral ethics in the
business environment.

Morality is a fairly wide concept and the sources thereof are diverse. The theme of morality
encapsulates the concepts of moral standards and non-moral standards. Morality has been
defined as the principles that govern what is right and wrong as well as what is bad and good. 6
1
Per Britannica, Ethics Philosophy, available at https://www.britannica.com/topic/ethics-philosophy, accessed on
29th September,2021.
2
Ibid.
3
Per Corporate Finance Institute, Business Ethics, available at
https://corporatefinanceinstitute.com/resources/knowledge/other/business-ethics/, accessed on 29th September,
2021.
4
Ibid.
5
Per Marketing in the 21st Century: 2.2 Ethical Theories. Available at https://www.google.com/search?
q=business+ethics+theories&rlz=1C1CHBD_enKE924KE925&oq=business&aqs=chrome.1.69i59l2j69i57j0i67l3j0i13
1i433i512j0i67l3.3408j0j15&sourceid=chrome&ie=UTF-8, accessed on 29th September, 2021.
6
Per the Oxford English Dictionary, available at https://www.google.com/search?
q=morality+definition&rlz=1C1CHBD_enKE924KE925&sxsrf=AOaemvI0dhfO7-i9T2Nyv5WDVRUPEDs_kg
%3A1632908138728&ei=ajNUYaXbK4yfUOOPpuAG&oq=morality+definition&gs_lcp=Cgdnd3Mtd2l6EAMyBQgAEIA
EMgUIABCABDIKCAAQgAQQhwIQFDIFCAAQgAQyBQgAEIAEMgUIABCABDIFCAAQgAQyBQgAEIAEMgUIABCABDIFCA
AQgAQ6BwgjELADECc6BwgAEEcQsAM6BwgAELADEEM6BAgjECc6BAgAEEM6BggAEBYQHjoHCCMQ6gIQJzoKCC4Qx
wEQrwEQJzoLCC4QgAQQsQMQgwE6CwgAEIAEELEDEIMBOgUIABCRAjoMCAAQsQMQQxBGEPkBOgoIABCxAxCDAR
BDSgQIQRgAUPG9EFjG6hBg-fEQaAJwAngEgAHoAogBozOSAQYyLTE4LjaYAQCgAQGwAQrIAQrAAQE&sclient=gws-
Moral standards refer to norms which human beings have regarding the kind of actions believed
to be morally acceptable or unacceptable. It has been opined further that the validity of the moral
norms is not subject to challenge since there is a premise that was established in its support long
time ago.7 Non-moral standards on the other hand have been defined to mean standards of
behavior or actions or practices that have no significant effect on the well-being of human
beings.8 These two standards are among the sources of morality. Other sources are: science,
politics, culture, emotion, religion, pluralism among others.

The subsequent paragraphs address on the specific provisions relating to the various questions.

Question (a).

This part of the question seeks to assess and analyze the facts in the case of Enron and
Bankruptcy Proceedings, the indictment of Jeffrey Skilling and Arthur Anderson case and the
factors that led to the downfall of the company. The intent of this is to set basis for comparison in
relation to Ethical Relativisms. The facts are as underscored in the subsequent paragraphs.

The Enron Scandal has been described as a series of activities that led to the bankruptcy of Enron
Corporation. The activities also led to the winding up the Firm of Arthur Andersen LLP which
was among the leading auditing and accounting companies in the world. In 1990s, the United
States Congress adopted a series of laws that sought to deregulate trade in sale of natural gas. As
a result, the Enron Corporation lost its monopoly over the market on the right to operate the
pipelines thereof.

Jeffrey Skilling, was initially a consultant and subsequently became the Corporation’s Chief
Operating Officer. He helped the Corporation to transform itself into a trader of
derivative contracts energy. He acted as an intermediary between natural gas producers and
customers thereof. The trading made it possible for the producers to curb the risk of fluctuation
of the price of energy. This was done by fixing the selling price of their products through a
contract that Enron Corporation negotiated for a fee. It was under his leadership that Enron later
dominated the market as far as contracts for natural gas were concerned. On a high note, the
Corporation started generating lump sum profits on its trading activities.
wiz&ved=0ahUKEwiluLzs8KPzAhWMDxQKHeOHCWwQ4dUDCA4&uact=5, accessed on 29th September, 2021.
7
Per Seven Pillars Institute, Moral Standard, available at https://sevenpillarsinstitute.org/glossary/moral-
standard/, accessed on 29th September, 2021.
8
Ibid.
Further, Skilling slowly but eventually altered the work culture of the Corporation. He laid
emphasis on a mode of trading termed as being aggressive trading. In this note, he hired top
candidates who had studies Masters in Business Administration (MBA) around the country. This
created a greatly intense competition in the business environment within the Corporation. This
competition shifted focus and aim which indeed came to fruition and led to closure of as many
cash-generating trades as the circumstances allowed and within the shortest span of time. Among
the brightest recruits was Andrew Fastow, who is described as having quickly rose through the
ranks to become the Corporation’s Chief Financial Officer (CFO). It is stated that Fastow was
charged with overseeing the financing of the Corporation through investments in the rising
complex apparatus. In the meantime, Skilling carried on with overseeing the building of its great
trading activities.

In the advent of the New Millennium, stiff completion saw profit margins of Enron Corporation
shrink. The shareholders began mounting pressure upon the executive members of the
Corporation. The executive members then resorted to unethical means of executing accounting
records. The most shouting one is that of use of ‘market-to-market’ accounting. The technique
was aimed at covering the loses that the Corporation was making. This technique made the
Corporation to write future gains of the Corporation in the current books of accounts. The impact
of this technique was to show that the current profits are high yet in the real sense it is not.
Further, the failed operations of the Corporation were transferred into the special purpose entities
thus further concealing the actual financial status.

The scandals furthered by the Corporation were unearthed in 2001 when a scrutiny of the
statements of accounts displayed that indeed the Corporation was running into serious losses.
This triggered the Securities and Exchanges Commission to investigate into the conduct of
business in the Corporation. Accounting frauds were disclosed and the Corporation went into a
free fall downwards. Chapter-11 Bankruptcy Proceedings then came to play as Elron wanted the
same declared insolvent.

Litigation then commenced and led to the conviction of both Skilling and Ley. The two were
convicted for an offence of conspiracy to defraud. Ley has since died while Fastow was released
in 2011.
Question b.

This second part of the question seeks to analyze the Enron Corporation case in relation to
Ethical Relativisms as proposed by various proponents. Ethical relativism has been described as
a norm through which an action is seen as to whether it is moral or immoral and is wholly
dependent on the society it practices. In this spirit, Albert Carr as far as ethical relativism is
concerned puts it aptly that just like poker has its own rules, ethics in business differ from the set
out standard rules of morality. 9 In this aspect, the thick and thin of Albert Carr brings out a
conclusion that the issue of business ethics is variable and relative and is not subject to a single
standard test.

In relation to the Enron case at hand, the issue of business ethics arises from the accounting
frauds committed in the course of carrying out business. Taking into consideration the proposals
set out in the theory of Albert Carr, the issue on whether such fraudulent transactions is neither
here nor there. In this aspect, the issue on whether it is ethical in the business environment that
Elron proceeded with the transactions which have been held as fraudulent is to be detetrmined on
the basis of the practices of the business environment in a given society.

In the Elron case therefore, the proposition would be that in the United States, the actions carried
out that resulted in the fraudulent transactions are unethical. However, the position would mean
that the practice could be tolerated in other sides of the world. This position is debatable on the
basis that an act that is morally wrong on one part of the world can be right on the other. In as
much as peoples live in diverse worlds, something at least in commonality exists. To that effect
therefore, some other theories counter the proposition taken by Albert.

The various philosophers who were opposed to the theory of ethical relativism criticized the
same on the basis that one cannot uphold moral values of one community and disregard the
norms of the other. In essence, the issue on double standards arises. The likes of Socrates, Plato
and Aristotle never subscribed to the theory of ethical relativism. In fact, they subscribed to the
theory that is the theory of rational inquiry.10 The theory proposes that instead of treating things
on the basis of ethical relativism, the big issue is to attempt to discover the truth about ethical
9
Albert Car’s Opinion on Business Ethics, available at https://www.123helpme.com/essay/Albert-Carrs-Opinion-
On-Business-Ethics-447181, accessed on 29th September,2021.
10
Lumen, Introduction to Philosophy, Socrates and Plato, available at https://courses.lumenlearning.com/suny-
fmcc-philosophy/chapter/socrates-and-plato/, accessed on 29th September,2021.
issues.11 Essentially, these three philosophers ascribe to the opinion that morality is not a relative
aspect but that which people must make inquiry and discover what content it has. In a given set-
up for example, the quest will not be to use relativism in morality but rather to seek to discover
what is moral in a given set of facts.

Taking the position of the critics of Albert Carr into account, it is clear that they call upon the
instincts of rationality. That each human being must seek to discover what is ethically right so as
to act in compliance to such. In Elron case, it is clear that an application of the theory of inquiry
as set out by the critics to ethical relativism holds that the fact that the fraudulent acts were held
to be criminal offence in the United States, the same applies to all parts of the world. The main
aim of this theory criticizing ethical relativism is that a party must make inquiry as to whether an
action contemplated about is morally ethical or not. To this extent therefore, the accounting
malpractices committed by the executives and shareholders of the Elron Corporation are
unethical in business relations.

Question c.

There are various corporate scandals which can be used to illustrate the importance of making
moral judgment and ethical decision as stipulated in this question. Among the scandals that have
been identified as forming part of the illustration that highlights the importance at hand is that of
use of child labour to produce products that are for commercial use. 12 Further and without
forgetting, the Elron Corporation case at stand is still that one scenario that has be taken into
account. These two scenarios/ scandals are illustrative of the fact that corporate scandals are real
and sound judgment must be exercised and the same must be ethically sound.

Another scandal that is classic in revealing the need to exercise sound judgment in decision
making in business ethics is exposed by Chelliah and Swamy. 13 The scandal exposes on
deception and lies in business strategy.

In essence, the scandals in the business field expose various business deals that are rendered as
being unethical business conduct. What the scandals clearly bring out is the fact that there is

11
Ibid.
12
Supra, note 1 as above.
13
Chelliah and Swamy 2018, available at
https://www.researchgate.net/publication/328520285_Deception_and_lies_in_business_strategy, accessed on
29th Septemvber,2021.
need to ensure that there is a lot of vigilance and sound judgment as far as making business
decisions are concerned. The use of fake news and good lies in strategy to ensure that businesses
lure customers into getting into and being retained in the market. These are morally and ethically
unsound business practices.

An application of the scope of these scandals to the ethical relativism theory as per Albert Carr
may see the same sound. However, as per the theory of inquiry as ascribed to by Plato, Socrates
and Aristotle, such scandals are outright immoralities and should be barred by all means. The
theory of relativism is therefore more condoning as opposed to the theory of inquiry that is strict
in scope. To that effect therefore, it is clear that the distinction between the two theories in
application is wide and broad.

Conclusion

In conclusion, the terms morality, ethics, business ethics and standard and non-standard tests to
ethics have been clearly underscored. The applicability of ethics in business environment has
also been brought to light. Further, the various sources of ethics and business ethics have greatly
been laid out.

The Enron case on the other hand has also been brought to book. The facts leading to the
investigation and discovery of various fraudulent accounting transactions have been brought out
clearly. It is clear that the downfall of the greatest profit making corporation is attributed to those
fraudulent accounting problems. The facts are clearly brought out.

The analysis of the case in relation to ethical relativism and the critics of the theory have been
laid our as well. The theory of Albert Carr dubbed relativism is discredited by the critics. The
effect of the theory is that ethics vary from place to place and society to another. This is
challenged by other philosophers in the like of Socrates, Plato and Aristotle. The corporate
scandals that highlight keen judgment on matters of business ethics have been brought out
clearly in the preceding parts of this paper. A proper conclusion to this effect therefore is that
business ethics are applicable and should be applied similarly in various parts of the world. This
conclusion can be discerned from the foregoing.