¶ … behave ethically are more apt to earn the trust of their customers, employees, and stockholders. A system of ethics serves as the backbone of an organization. Without such a backbone, an organization cannot be firm enough to provide its various parts (employees, stockholders, customers) with what they need. An organizational culture supported by a system of ethics enables the company to grow, develop and attain suitable positive goals that benefit all stakeholders. When that system is evident to customers, employees and stockholders, all three are more willing to climb on board to be part of the journey. Ethical behavior on the part of organizations can take various forms -- from corporate social responsibility programs to simple workplace environment cultures. Yet some companies fail to truly understand these forms and how they work. This paper will look at one organization -- Adelphia -- and examine how it failed to embrace an adequate ethical framework and what happened as a result. Background

As a publicly-traded corporation, Adelphia, Inc. was one of the largest providers of cable services in the United States. After the company went public, it was learned that the company had materially misrepresented its audited financial statements by failing to disclose billions of dollars in debt. To make matters worse, the company's independent auditors were found to have been complicit in the fraudulent activity, helping the company to conceal the lavish personal expenditures of the Rigas family.

"Cooking the Books": The First Ethical Issue

The first major ethical problem raised by the Adelphia case relates to the manipulation of Adelphia's financial statements. John Rigas and his sons routinely "cooked the books," purposefully inflating earnings in an effort to meet shareholders' earnings expectations, and to demonstrate the company's earnings power to prospective investors. Fearful of a plunge in

When Adelphia's quarterly numbers were out of line with creditors' covenants, employees were tasked with making arbitrary adjustments to the accounting records, inflating the company's revenues and reducing its expenses, ultimately bringing the numbers back into alignment with creditors' expectations (Meier, 2004).
Unfortunately, Adelphia's fraudulent accounting practices went undetected by the company's auditors, who failed to ensure that the company's financial statements accurately reflected the company's true financial position (Barlaup, Hanne & Stuart, 2009). For instance, the funds owed the company by the Rigas family went undisclosed in the statements, because the management at Adelphia deemed such disclosure as being "unnecessary" (Barlaup et al., 2009). Given that Adelphia was a publicly traded company, the purposeful non-disclosure caused potential investors to rely on financial records that were grossly misleading. The inevitable result was the investors continued to inject money into a company that had all the appearances of profitability and sustained growth, but that was, in reality, rapidly becoming insolvent. Moreover, lending institutions also relied on the "independently-audited" financial statements, and they were more than eager to loan the company money, given Adelphia's presumed state of financial "profitability."

"Piggy Bank": The Second Ethical

The second ethical problem in this case relates to the Rigas family's use of publicly-held corporate funds as a personal "piggy bank." The Rigases used the company jet for personal reasons (without approval of the Board of Directors), on one occasion flying to Africa for a safari (Markon & Frank, 2002). On another, one of John Rigas' sons used a corporate jet to pick up an actress friend of his (Grant, Young, & Nuzum, 2004). The former CFO claimed that Adelphia's funds were used by one of Rigas' sons to buy a condominium, and to build a $13M golf course (Grant et al., 2004). In another incident, the corporate jet was used to ship a…