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  • 1. Ethics in Organisation Lessons Learnt from Enron BECG-CORE
  • 2. Organizational Ethics: 4 «bottom lines»
  • 3. Enron Scandal
    • Enron stands for the greatest company scandal in the history of the US economy and has become a symbol of corruption for the whole Western economic system.
  • 4. Legend-Out…Low-In
    • 7 th Largest Company
    • 100Billion$+revenue
    • 1.8 Million$ Benefit in 5 yrs.
    • 88.6% increase in 2000
    • New Economy’s Gem
    • CEO named as ‘Messiah in the Energy Sector’ by Economist
  • 5. 4500 employees lost their jobs.
    •   Investors lost some 60 billion dollars within a few days; for many it meant losing their old-age security.
    • The pension fund for the company's employees was obliterated.  
  • 6. Citizen’s trust in the American economic system was destroyed.
    •   Losses on the financial market amounted to the worst stock value loss in peaceful times.
    •   Banks were suspected of collusion.
    •   The auditing firm Arthur Anderson lost its accreditation.  
  • 7. The rules for financial reporting were drastically sharpened:
    • Sarbanes-Oxley Act
    • The close ties of the company's founder, Kenneth Lay, to US President George W. Bush came under sharp criticism.  
  • 8. Political Scandal-Lack of Equity
    • 29 top executives : 1M $ in stock options before bankruptcy whereas employees were forbidden to sell their options
    • CEO alone : sold 67m $ worth of options
    • Severance package: 13 500 $ per employee
    • 63% of the 21,000 employees lost all their pension plan (plan 401K)
  • 9. Dabhol Power Corporation, India
    • One of the few “real” assets of Enron
    • 65% Enron; 10% G.E; 10% Betchel; 15% India,
    • Biggest gas power plant in the world
    • 3 M$ in investment (10% foreign investments in India 1992-2002)
    • Project of 2 200 megawatts
  • 10. Human Rights’ Violation
    • Displacement of 2 000 people and appropriation of land without prior notification
    • Arrest of 300 pacific protestors a day, average of 8-day detention period, without trial and with violation of human dignity
    • Demonstrators, mostly women, dragged from their homes, and beaten (lath charge, tear gassing, helicopters), detention, humiliation, intimidation
  • 11. Environmental Abuse
    • No impact study; no alternative site
    • Mockery of consultation process
    • Use of drinking water from population (8 300 liters / minute)
    • Pollution of rivers by used waters
    • Contamination of sea-water (down-load of 13 million liters of warm water per day)
    • Destruction of plantations (mango, cashew) and fisheries
  • 12. Characteristics of “New Economy” management: Value of Idealized Top
      • CEOs = 500 times average employee salary
      • bonus gone from 3$ to 64$ per 1000$ of value in 10 years
      • aggressive PR; image of “responsibility ”
      • only 1.5% of stock options paid to employees; etc.
  • 13. Complicity or cooptation of social actors :
    • Governments (Enron 7M$ public investments) : USA, Germany, UK, France, Italy, Japan…);
    • Financial analysts; accounting and consultation firms;
    • Business schools; business press; host governments; etc…
  • 14. Watkins Whistle blowing has paid
    • Cleansing of financial markets
    • Some companies enter stocks options into their books as expenses : Boeing, G.E., G.M., Citigroup
    • U.N. Global Compact; CSR; social and environmental accounting; OECD principles, Caux Table; etc.
    • 36% of CEOs more aware of integral responsibilities (but only 10% invest in CSR)
    • 19% of transnational companies have disinvested from countries where Human Rights are violated
  • 15. How to bring accounting firms to integrate CSR norms ?
    • These norms should represent reality
    • ensure company governance
    • make companies responsible not only towards shareholders
    • “ de-co-opt” media and other organizations
    • increase the integrity of business students and managers ?
  • 16. Organizational Ethics, 4 Ways