Business Ethics Can Be Defined as the Serious Examination of How Employees of an Organization and Institutions Should Behave in Order to Maximize the Overall Value of Their Organization

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  GERMAN JORDANIAN UNIVERSITY Business Ethics Professor Montaser Tawalbeh Ruba Nouh (2011401055)  5/29/2013  Ruba Nouh 1 Business ethics can be defined as the serious examination of how employees of an organization and institutions should behave in order to maximize the overall value of their organization. It deals with moral principles and social values. Moreover, it helps the organization to classify and distinguish between what is right and what is wrong. In short, business ethics can be well-defined as a code of conduct that provides guidance to the organization and separates the moral and immoral, proper and improper, fair and unfair actions of the organization‟s e mployees. Every organization should establish its own code of ethics to ensure that all the actions and decisions are directed and controlled under the umbrella of ethical and moral standards. Decisions taken within an organization should be influenced by the culture of the company and its own code of ethics, this code of ethics should be implemented in order to provide moral guidelines to each department in the organization. The greatest challenge for any organization is to implement its code of ethics efficiently and effectively in every situ ation even when it‟s facing an ethical dilemma; ethical dilemma occurs when managers are faced with business choices that create tensions and conflicts between profit and ethics, or between the public good and their  private gain. Ethics has different meaning to different people, however it normally boils down to a basics of right actions and wrong actions, within a business context it includes taking decisions that align with the sense of moral and immoral. Each organization can establish its code of ethics  based on one of the three ethical theories; Virtue ethics, ethics for the greater good and universal ethics. According to the Greek philosopher Aristotle, virtue ethics is about focusing on a clear established ideal and try to reach it , however those desired ideals might conflict with the ideals of the society. Ethics for the greater good (Utilitarianism) which is proposed by the Scottish  philosopher David Hume, focuses on “The end justifies the means “and the ethical choices that offer the greatest good for the greatest number of people but when actions or means are  Ruba Nouh 2 neglected, the actions taken to achieve the outcome may be highly inhumane and unethical. The third theory, universal ethics is attributed to the German philosopher Immanuel Kant, argues that there is a set of ethical standards that should be applied to everyone, everything and everywhere, regardless of the situation. It reverses the theory of the greater good as there is a huge concentration on the process while disregarding the outcome which might be, in this case, ethical. The company‟s actions and decisions  reflect its code of ethics depending on one of these ethical theories. Enron Company was one of the largest independent natural gas companies in the United States employing around 25,000 people. It was allowed to be listed as the seventh largest company in the United States but instead it is converted to the biggest corporate failure in the history. Enron turned into a leader in the industry by falsifying their accounting records and their financial statements. Cookie jar accounting is a sign of fraud and misleading accounting practices which took place in Enron Company. It cooked its books and prototyped itself to be a growth company and eventually on December 2, 2001 Enron filed for bankruptcy. Ken Lay became the new CEO of Enron and in 1990 he hired Jeffrey Skilling as the head of the finance department then in 1997 he became the chief operating officer at Enron. From 1998 to 2000, the total compensation paid to the top 200 executives at Enron went from $193 million to $1.4 billion. In December 2000, Enron announced Jeffrey Skilling as a president and chief operating officer and Ken lay remained as a chairman. By November 2001, it was disclosed that Enron had potentially hidden  billions of dollars in debt and that Enron‟s financial statements had not been accurate for years.  Ruba Nouh 3 The Enron fraud case is extremely complex. Some say Enron's demise is rooted in the fact that in 1992, Jeff Skilling, then president of Enron's trading operations, convinced federal regulators to  permit Enron to use an accounting method known as mark to market. This was a technique that was previously only used by brokerage and trading companies. With mark to market accounting, the price or value of a security is recorded on a daily basis to calculate profits and losses. Using this method allowed Enron to count projected earnings from long-term energy contracts as current income. This was money that might not be collected for many years. It is thought that this technique was used to inflate revenue numbers by manipulating projections for future revenue. (Lee Ann Obringer, how cooking the books works ).The fraud in Enron Company is quit complex as Jeff Skilling used the “mark to market” method and this method is  about recording the securities on a daily basis in order to calculate the losses and profits that are earned in the company and by using this technique the recorded transactions might not be collected for many years which in return will increase the revenues by manipulating the future revenues. Cookie-jar accounting is an accounting practice where reserves from a good year are used to offset losses in bad years. A company may decide to use cookie-jar reserves in order to make its  profitability seem smoother and to ensure that it is always able to meet its targets. The term comes from the idea of a store of cookies (biscuits) that somebody buys and can „dip into‟ whenever they‟re hungry. Because cookie -jar accounting is a way of misleading investors, it is forbidden for regulators. (Cambridge University Press) . Cookie Jar accounting was used in Enron‟s transaction and by using this method Enron have reached its goal and got a smoother  profitability.
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