Waste Abuse Fraud and Corruption Term Paper

  • Length: 10 pages
  • Sources: 6
  • Subject: Business - Ethics
  • Type: Term Paper
  • Paper: #55120406

Excerpt from Term Paper :

" While there are factors like peer pressure and authority that come into play, some research claims to have isolated significant features of an individual's character that make them more likely to commit acts of fraud, bribery and falsification in the corporate context (27, 2009). For example, those people with "high levels of ambition were more likely to transgress moral codes, competitively stab colleagues in the back and make dubious decisions relating to asset-stripping, disinvestment, and so on" (27, 2009).

Trevino's (1986) work is relevant when it comes to understanding individuals and corruption. There are a couple questions regarding moral personality that come up: first of all, whether or not a person sees an event or issue as a moral problem; the second is how they decide to act in relation to that problem. Kohlberg's theory of cognitive moral development emphasizes the cognitive or reasoning aspect of moral-decision making (604, 1986). Trevino builds upon Kohlberg's theory to understand ethical decision-making and how it is related to personality structure (Fleming & Zyglidopoulos 28, 2009). According to Kohlberg's theory of cognitive moral development, there are three different levels to ethical development and within those levels are two stages each that a person passes through -- advancing from childhood to adulthood as they become more moral. The third level is the "principled" level. This is the level where we have "an awareness of differing moral positions, and freely choose to endorse certain ethical ideas, even if that is considered by others to be a minority position" (28, 2009). According to Kohlberg, only 20% of American adults make it to the final stage of moral development; most American adults stay in level two for perpetuity (28, 2009).

Extending the individual-centric approach to unethical and corrupt behavior, Trevino (1986) adds other character variables that pin down the dispositional make-up of the bad apple. Important here is whether someone acts consistently with their moral dispositions… If a senior executive at Siemens felt it was morally wrong to establish illegal slush funds in order to win contracts through bribery, would they act in accordance with that conviction? The individual variables addressing this question are ego strength, field dependence and locus of control. If our Siemens executive has robust ego strength then they are able to stick to their convictions and guide their actions accordingly (Fleming & Zyglidopoulos 28-9, 2009).

Basically, those with high ego strength are more likely to do what they feel is the right thing to do (Trevino 609, 1986). Enron came as a shock to many. Before the Enron scandal came out, Andy Fastow's characteristics were praised in the business press as "the guiding spirit of a new type of corporate executive" (Fleming & Zyglidopoulos 32, 2009). It's only when we look back now that we can see him for what he really was: the epitome of the organizational Mephistopheles (32, 2009).

We cannot look at the Enron scandal with a "bad apple" approach to corruption because it makes decision-making the main feature of ethical reason. In some scenarios, the situation is organized in a manner that ethical issues or dilemmas fail to make it onto the radar. "If the corrupt activity becomes normalized within the operating system of the firm over time, as it did in Enron, it ceases to pose a dilemma because it is lost in 'business as usual' rituals" (Fleming & Zyglidopoulos 32, 2009).

Post-Enron, the world is a much more cynical place. Business leaders are now rated lower than lawyers and politicians (something that was at one time nearly impossible to think). Business leaders, to many, represent bad apples, in bad barrels, in bad forests (Burke & Cooper 37, 2004). Paradoxically, it is the scandals exposed by the break down of American capitalism -- the acknowledged bad apples -- that have exposed the weaknesses in the system -- the barrel (Gandossy & Sonnenfeld 126, 2004). Chief executives are now paid exorbitant amounts of money; the average CEO's compensation has risen from 42 times that of the average worker in 1980 to 420 times in 2001 (126, 2004). Undoubtedly, the rise can be related to executive stock options. Gandossy and Sonnenfeld (127, 2004) note that when executives are paid based on the appreciation in the momentary price of a stock (perception) rather than the enhancement of the intrinsic value of a corporation (reality), the temptation for management to hype stock prices is apparently overwhelming (127, 2004). Yet, evidence suggests that corporate illegality cannot simply be dismissed as the result of a bad apple who inadvertently slipped into the corporate barrel (127, 2004).

Individuals who commit corporate crimes are not somehow especially bad or immoral people. Corporate crime results from a confluence of an individual's willingness to commit crime and her incentives and ability to do so. Any large group of people (such as a publicly held corporation) contains people who will be willing to break the law if the gains from doing so are large enough (Gandossy & Sonnenfeld 201-2, 2004).

The "bad apples" and "bad barrels" of and in companies like Enron are very often arrogant, greedy to no end, and convinced that they deserve every penny they get, but in a way, the whole scandal may have been good for us as they have lit up a multitude of flaws in the disturbed barrel of capitalism (Gandossy & Sonnenfeld 202, 2004). Using this type of analysis, it helps us to understand corporate corruption, but only in a very abstract fashion. The moral philosophy of Arendt would tell us that every individual who takes part in corruption has the choice to say no. However, the bad apples approach isn't enough because it doesn't take into consideration the plethora of excuses and justifications for bad behavior people come up with. While Andrew Fastow later fully confessed that the Enron people were driven by ambition and greed, there were still many who claimed to be completely innocent, employing many different colorful justifications (Fleming & Zyglidopoulos 34, 2009). This is the part of the whole debacle that is, arguably, the most worrisome: how some key individuals have convinced themselves that their unethical behavior was somehow justified. "Jeff Skilling was particularly strident in this explanation for his corruption, since he believed that the welfare of shareholders, customers and the entire energy industry was directly linked to the unusual success of the company" (34, 2009).

To take Skilling's explanation for why he did what he did is to be naive. To think that he did not know that what he was engaging in was wrong is pretty difficult to envisage. To take part in such unscrupulous behavior and then rationalize one's reasons for doing so while all the while holding an ethical view of oneself is difficult for many to conceive. The rationalizations appear to be self-deception at its finest. Many of Enron's executives seemed to truly believe that they were upstanding citizens doing the right thing. When certain executives claimed to have not known what was going on in the company, we see a perfect example of self-deception. This self-deception is not a part of being a "bad apple," but rather the self-deception is about a culture that nurtures certain behaviors when it comes to following one's ambition. "Self-deception implies that an individual is both the sender and the receiver of a lie. How can we fall victim to our deception if we assume that by definition the liar has some grasp of the truth being concealed (Fleming & Zyglidopoulos 36, 2009)?"

One of the favorite pastimes of social psychologists is to study how different we all become once we are a part of a group. There are numerous experiments that depict us acting differently once we have a group whom pressures us to conform to its set of rules.

A consequence of the 'growth by any means' mentality is that corporate governance structures become a precarious and rather solitary dance between principals (investors) and agents (senior managers). All other stakeholders -- workers, the environment, government, consumers and so forth -- are left at the wayside (Fleming & Zyglidopoulos 129, 2009).

Many corporate social responsibility fighters now argue that the myopic focus is always self-destructive since the "minor" stakeholders are as vital to the maintenance of the capitalist firm as investors and owners (Fleming & Zyglidopoulos 130, 2009).

Corruption, as seen in the case of Enron (as well as other companies like Tyco, WorldCom, and Arthur Anderson) can be a very slippery slope. Enron (and WorldCom) descended very quickly into illegality. When there is a lack of significant moderation in corporations, illegal practices balloon almost overnight.

Works Cited:

Bratsis, Peter. The Construction of Corruption, or Rules of Separation and Illusions of Purity in Bourgeois Societies. Social Texts, 21(4), 9-33.

Burke, Ronald J. & Cooper,…

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"Waste Abuse Fraud And Corruption" (2010, October 15) Retrieved April 25, 2017, from
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