2. National Business Ethics Survey
2003-2005
• Ethics Training—Up 14%
• Formal Ethics and Compliance
Programs—Up 19%
• > 50% report misconduct
• Only 55% willing to report
misconduct
3. Need both Programs and Culture
• Compliance orientation—formal
rules, policies, monitoring and
enforcement
• Values orientation—education,
shared values and symbolic
management
5. Ethics from the Top Down
• Managers and Executives must be seen
as moral persons
• Do moral persons naturally rise to
positions of power?
• Controlling leaders may be productive,
but ethical issues unlikely to be
examined
6. Ethics from the Top Down
Social Identity Theory
• Creates a highly cohesive, uniform and
consensual group
• Aggravates hierarchical imbalance of
power
• Executives personally identify more
with the organization and have more
optimistic opinion of ethical culture
7. Ethics from the Top Down
Communication
• Information, especially negative
information, is deliberately withheld or
distorted as it moves up the hierarchy
• Disciplinary issues are handled as
private personnel matters and not
published to rank-and-file
8. Ethics from the Bottom Up
• Employee screening has limited
effectiveness
• Organizational dynamics have
more impacts on unethical
behavior than individual antisocial
personality traits
• Study by Verkerk et al. showed
some promise for participative
democracy systems
9. WHISTLEBLOWERS
• Patchwork of legal protections
frequently ineffective
• Whistleblower is required to first
give employer notice of problem
and opportunity to correct
• Whistleblowers pay high price
financially, personally and
emotionally
10. Organization and Society
Public Affairs Function
• Proactive
→ Legislative lobbying and
campaign contributions
→ Media press releases
• Reactive
→Adjusting internal processes
to accommodate new regulations
→ Media damage control
11. Organization and Society
The Cheating Culture
• “Winner-take-all” rewards
• Decreasing social cohesiveness
• Glorification of rich & famous lifestyles
• Dismantling of regulatory safeguards
• Emphasis on bottom line
• Competitiveness and social Darwinism
• “Trickle-down” corruption
The Cheating Culture, David Callahan, 2004
13. KENNETH LAY
• ENRON Chairman and
CEO, from 1986 until his
resignation on January
23, 2002
• Ph.D. in Economics,
Univ. of Houston
• Active in Republican
politics--Bush Pioneer
• Many of Houston elites
still consider him
honorable
14.
15.
16.
17. JEFFREY SKILLING
• Was chief production
director of WLXT Ch.
60 at age 16.
• Harvard MBA
• Hired by Ken Lay in
1990 and was briefly
CEO Feb-Aug 2001
• Suffered nervous
breakdown in NY in
April 2004
18. ANDREW FASTOW
• MBA Northwestern Univ.
• Developed “creative”
financing practices while at
Continental Illinois, which
failed during S&L crisis
• Hired by Skilling in 1990
• Complex network of
offshore limited
partnerships allowed
assets and debts to be
maintained “off balance
sheet”
19. Andrew Fastow’s motto was, “I’ll fund all your
deals.” These were distributed at an internal Enron
meeting. Employees who closed big deals were
generously rewarded. Employees who did not close
deals were gone.
20. SHERRON WATKINS
• Master of Accounting and
CPA; former auditor at
Arthur Anderson
• Joined Enron in 1993 and
left in Nov. 2002 as Vice
President of Corporate
Development
• Author of series of memos
in Oct/Nov 2001 which
formed basis for
indictments and
convictions
21. ENRON
The good, the bad, the ambiguous
• Hired “the best and the brightest” Hubris?
• Employees who produced were rewarded
• Had aspects of a formal ethics program
• Contributed to local community
• Fun and exciting place to work, with lavish
facilities and employee functions
• Culture of innovation—did not want to hear
“no” or “it can’t be done”
• Incestuous relationships with regulators,
auditors and Wall street
23. Practical Ethics
• Critical examination of reward systems
• Effective communication both from top
down and from bottom up
• “Safe” channels for whistleblowers
24. Limitations of Ethics Programs
• Need for outside accountability
• Impact of cultural values on
organization
• Impact of corporate values on popular
culture
• Impact of corporate influence on
legislation/deregulation
• Can an organization be “moral?”
