Enron code of ethics pdf

Bussiness Ethics Assignment

CASE 3.2 "Ethics, Schmethics"-Enron's Code of Ethics

In July 2000, Enron Corporation published an internal code of ethics docu- ment that ran 64 pages in length (see the Appendix 1).Page 12 of the document proudly announced the company's position on business ethics:

Employees of Enron Corp., its subsidiaries, and its affiliated companies (collectively the "Company") are charged with conducting their business affairs in accordance with the highest ethical standards. An employee shall not conduct himself or herself in a manner which directly or indi- rectly would be detrimental to the best interests of the Company or in a manner which would bring to the employee financial gain separately derived as a direct consequence of his or her employment with the Com- pany. Moral as well as legal obligations will be fulfilled openly, promptly, and in a manner which will reflect pride on the Company's name.

Products and services of the Company will be of the highest quality and as represented. Advertising and promotion will be truthful, not exagger- ated or misleading.

Agreements, whether contractual or verbal, will be honored. No bribes, bonuses, kickbacks, lavish entertainment, or gifts will be given or received . in exchange for special position, price or privilege . . . Relations with the Company's many publics-customers, stockholders, governments, employees, suppliers, press, and bankers-will be conducted in honesty, candor, and fairness." .- ~ ~ ~ -

Subsequent investigations into the inner workings of Enron Corp. revealed that the only time this code of ethics received formal attention (other than, presum- ably,when it was created and formally accepted) was when the board of directors voted to waive key provisions of the code in order to allow the off-balance-sheet partnerships that Chief Financial Officer Andy Fastow ultimately used to hide over half a billion dollars of debt from analysts and investors.

A more realistic picture of the apparent flexibility of Enron's ethical culture can be found in the extreme conflict of interest represented in its relationship with Arthur Andersen. Andersen provided both consulting and auditing ser- vices for fees running into millions of dollars-money that became so critical to Andersen's continued growth that its employees were encouraged to sign off on off-balance-sheet transactions-transactions that were not shown on Enron's publicly-reported balance sheet-that stretched the limits of generally accepted accounting principles (GAAP) to their furthest edges. In addition, Enron hired former Andersen employees to manage the affairs of their former colleagues, which further strengthened the conflict of interest in a relationship that was supposed, at the very least, to be at arm's length, and, at best, above reproach.

1. What is the purpose of a code of ethics? 2. Do you think the employees of Enron Corp. were told about the vote to put

aside key elements of the code of ethics? If not, why not? If they had been told about the decision, what do you think their reaction would have been?

3. Do you think that the employees of Enron Corp. were planning to defraud investors all along? If not, why not?

4. Explain the conflict of interest in Enron's relationship with Arthur Andersen. Source: Enron Code of Ethics, www.smokinggun.com .