Encouraging ethical behavior other than legally

Conflicts of interest In any endeavor involving more than one person, there will be conflicts of interest.  In the Enron case, these conflicts included: Individual vs. corporate goals (for example, Enron leadership’s self-interest vs. the interest of its shareholders) Enron vs. Arthur Andersen auditors Arthur Andersen auditors vs. Accenture consulting Investors vs. Arthur Andersen auditors Avoiding the conflicts I don’t believe “avoid” is the right word.  That word implies that conflict is eliminated.  But there are always competing interests in any exchange.  Therefore, I believe the better course of action is to recognize and acknowledge that the conflicts exist – and then to try to create structures and environments that reduce their effect. Further, “what could have been done” depends, to a large extent, on who is being asked to do something.  Obviously, Enron senior leadership could have decided not to engage in the off-balance-sheet activities and not pressure their auditors to support their efforts.  The Enron Board could have both looked more closely at the senior executives’ activities – as well as have chosen leaders with a more ethical background.  Arthur Andersen auditors could have been more assertive about documenting and escalating their concerns – and Arthur Andersen’s leadership could have been stronger about backing that kind of behavior (and done so, even in the face of losing some revenue). All of these actions could have mitigated the effect of the conflicts, and potentially avoided the outcome that resulted. Changing the law (Murray, 2018), in talking about corporations, notes that, “the corporate structure shields the owners and employees from personal liability.”  As a result, the penalty for misdeeds by individual employees is often borne by the company instead.  While there are good reasons for a company to be considered its own entity, one legal change I would make is to make it easier for outside entities to punish individuals for their corporate misdeeds.  For example, individuals who have suffered as a result of willful, fraudulent activities of an employee might be allowed to seek damages directly from the individual.  Or government entities could hold an individual (instead of just the corporation) accountable – as was done post-Enron in requiring that, “CEOs personally vouch for their companies’ financial statements and public reports” (The Post-Enron CEO: It’s Lonely at the Top). One of the most effective way to encourage (or discourage) any particular kind of behavior is how society, collectively responds to a given situation.  Sporting events are instructive in this area.  My kids play a variety of sports – and the distinction in how parents react to referees’ actions always amazes me.  At some events, parents are constantly screaming at and criticizing the referee. At others, there is little commentary. The difference lies in how others around the ‘screaming parent’ chose to respond.  At some venues, they join in.  At others, they quietly inform the parent that aggressive behavior isn’t part of the experience the team is trying to create.  And this attitude goes so far as a coach asking a parent to leave a team because of their behavior. This ‘encouragement’ can apply in the corporate world as well. Employees and leaders engage in a variety of behaviors.  Their peers (and leaders) can choose to join in . . . or quietly take them aside and explain that aggressive behavior isn’t part of the experience. This ‘peer pressure’ – along with decisions by leaders about what kind of people to hire and how to respond to different kinds of behavior (using rewards, etc.) – can be effective ways to encourage ethical behavior.   References Murray, J. (2018, March 6). Do You Know These 7 Basic Facts about Corporations?Retrieved July 2, 2018, from the balance small business: https://www.thebalancesmb.com/do-you-know-these-fundamental-facts-about-corporations-398198 The Post-Enron CEO: It’s Lonely at the Top.(n.d.). Retrieved July 1, 2018, from Smith, Gambrell & Russell, LLP: http://www.sgrlaw.com/ttl-articles/598/