Ethical perspectives on the Merrill Lynch-Enron Nigerian barge deal

Business Ethics

There are many ethical aspects that are involved in this case that can be perceived from different vantage points. The investment banker at Merrill Lynch, Daniel Bayly, seemed to perceive an opportunity that he, and his good business partner Jeffrey McMahon, could capitalize upon and provide a significant return to the stakeholders they represent. The opportunity seemed rather straightforward, however accounting for the opportunity was not quite as clear. The two individuals structure an agreement that was something along the lines of what most people would consider a loan, but had some clever contractual jargon that made the partnership believe they could account for it as something along the lines of a different agreement that would benefit them more in the end. Ironically, a twenty-eight-million-dollar agreement ended up costing more than eighty-million in total because not everyone privy to the arrangement viewed the deal from the same perspective that these two individuals believed would suffice.

From the Kantian moral perspective, the deontological approach, it would be possible to create an argument that would defend the agreement. For example, it is not clear that either individual from either firm had any ill intentions in the deal. From their perspective, they might have believed that they could help a Nigerian company, provide a return for their own stakeholders, and potentially even enhance their personal careers from such a deal. These individuals may have attached a low priority on the acceptable accounting measures that were relevant in the case and sincerely believed that their good intentions would add value on many different levels. From such a perspective, it is not clear that the individuals were acting in any way that would allow them to be the subject of something as serious as committing fraud. They may have simply believed that they were creating value on some level and tried to account for this value in the best manner they believed was possible.

However, from a broader perspective, it is easier to see how such decisions might have broader consequences on a level that includes society on a more holistic basis. Although the individuals may have thought they had found a way to maximize their opportunities value by accounting for it in a creative agreement, the agreement that they formed was one that was certainly questionable if you consider the principles of accounting. When a company accounts for a transaction, they are required to do so in a way that accurately reflects the agreement that was made, and not simply choosing whatever form of an agreement that suits them best. It seems clear that even though the individuals thought they had enough discretion to structure the deal in a non-conventional manner to make the deal even more lucrative, the regulatory agencies did not agree and felt that the deal was created to intentionally deceive all the parties that were involved in the deal.