“Enron: The Smartest Guys in the Room” is a 2005 American documentary. The film is based on the successful 2003 book having a similar title by reports Bethany McLean and Peter Elkind from Fortune. Both the film and the book study one of the greatest corporate scandals in the history of America. The film explores the Enron Corporation’s collapse in 2001 that led to criminal prosecutions of some of the firm’s top directors following the succeeding Enron scandal. The film also reveals how Enron traders were involved in the electricity crisis of California. The movie includes interviews with Elkind and McLean, along with form Enron managers and workers, reports, stock analysts, and the former California Governor, Gray Davis.
The enthralling documentary charts the complex dimensions of the corporate crime of the century, which ultimately resulted in the collapse of the seventh-leading business operation in the country. Peter Coyote narrates this parable about ethical malfeasance, arrogance, power plays, and greed in which Enron switched from a natural gas pipeline corporation to a multinational conglomerate ( Gibney, Klot & Motamed, 2005). While the key players in Enron’s collapse refused to be interviewed, Gibney provides the audience with great insights into their style of leadership through the usage of corporate audio, news footage, as well as videotapes, C-Span clips, a comedy skit performed in front of employees, among others ( Cunningham & Harris, 2006) . The collapse of Enron is perhaps the most horrendous case of contemporary business corruption. The firm is associated with various illegitimate schemes, which include creating the California energy catastrophe as a method of driving up utility costs at the ordinary American’s expense. In a highly competitive business setting, Enron traders turn to all forms of scheming transactions to make cash at all costs and preserve their high-paying occupations.
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The Enron scandal is a case of an ethical accounting scandal that resulted from the use of “mark-to-market” accounting for faking the company’s profits and misuse of special purpose entities. The company worked to make its losses appear less than they were in reality, and “cooked the accounting books” to make their revenue appear much higher than it was. The company’s stock plummeted following the news of the scandal, and the SEC started an investigation. The investigation resulted in jail time for most of Enron directors, with its accounting firm Arthur Anderson losing all its clients and ultimately closing ( Cunningham & Harris, 2006) . Enron filed for bankruptcy, leading to the introduction of new regulations based on the scandal aimed at preventing similar incidents in the future. This is a case in which business ethics means that full transparency and honesty are what customers and corporations should expect. From the film, one of the factors that contributed a lot to the ethical scandal is the business’s corporate culture. Enron was a descending and harsh firm that emphasized financial goals and competition. For instance, the company had a rating system that mandated that 20 percent of all its workers be ranked as lower than requirements annually and then made to leave the company ( Fusaro & Miller, 2002) . While the company believed this rating system could promote staff to work hard, in the real sense, the system led to more harm to the company than benefits.
The central ethical dilemma faced by the company was employees upholding ethical standards while ensuring excellent performance. First, the company’s competitive environments, as well as the rigorous standards of performance evaluation, contributed to a deception culture. Given that employees feared being fired, and their main focus was on making their performances appear good. The employees failed to adhere to the ethical standards, and their only focus was on attaining the company’s financial goals. Once some of the employees started to cheat on their jobs, cheating more was the only way to beat them. Slowly, no employee felt ashamed about cheating since that was the only option they had, and all their workmates around them were cheating ( Fusaro & Miller, 2002) . As a consequence, a deception culture developed. Workers were evaluated on their cheating abilities. In such a working atmosphere, the individuals who did not cheat were considered odd. For instance, Margaret Ceconi, a staff with Enron Energy Service at one point, exposed the reality of accounting problems at the company.
Besides, the competitive setting led to cheating and concealing of mistakes since employees had a tendency of being uncooperative and rarely communicated with one another. The workers were not willing to ask questions as questioning anything was considered embarrassing. Additionally, the employees were less prepared to share information and resources as they contested with one another. As a result of such a working environment, few workers at the company understood their jobs. Thus, they just attempted to conceal errors and make their work appear good. Further, the employees ignored the cheating and errors of others, and never talked about their doubts concerning the work of others ( Hatfield & Buchko, 2008) . Thus, the employee found themselves in the ethical dilemma of doing the right things and keeping their jobs. Eventually, Sherron Watkins, the whistleblower, resolved her dilemma by exposing what was going on in the company. She was deeply aware of the company’s illegal accounting activities and could not stand the fact that the firm was deceiving its investors.
Particularly apparent in the movie was the intentional ethical inconsideration which the company’s former and succeeding CEOs perpetuated. To begin with, the principle that ethics must be related to sociology, especially in improving the society in which an individual belongs. The company defeated this principle, as shown in the way that the company abused the energy deregulation which existed in the California State after imposing a self-declared energy shortage, creating a year-long crisis of power outages across the state ( Levin, 2005) . The CEO’s considerations when they were reaching this decision ought to have taken into account the people who were confided in healthcare facilities, particularly those patients who were connected to life-support machines, which necessitated readily-available electricity.
Generally, the film did not resolve the ethical dilemma that faced Enron but instead exposed what was going on in the company, and what contributed to its collapse. The ultimate goal of the film directors was to expose how rogue the company’s executives and traders were, and how they led the company in fraudulent ways. Through collecting evidence from different stakeholders, the film only informs the general audience what was happening in the company, but does not offer any solutions. The film is, without any doubt, a perspective on the doomed company, but its collection of evidence and people makes compelling scrutiny of what can occur when the moral compass of people is discarded.
However, there are various alternative ways through which the ethical issues in the company could have been resolved. First, the company’s management and traders were the ones who perpetrated the culture of deception, as well as all the ethical issues surrounding the company. The core objective of the top executives and the traders was profit, and they would do anything in their power, such as causing power shortages to benefit from high electricity prices. Therefore, the solution to this ethical dilemma should be looked at from the top downwards. The traders and company executives should have conducted their business guided by the principles of business ethics.
In ethics, business ethics is the code of conduct that companies are expected to follow when doing business. The business operations at Enron should have been guided by the company’s ethical conduct. One of the ethical principles that should have guided the investors and the traders at Enron is the principle of integrity. The directors were stuck between maximizing profits and applying integrity ( Hatfield & Buchko, 2008) . Thus, they should have ensured that while trying to maximize profits, they did the right things. Also, the executives should have been honest in their dealings and should have been truthful and not deliberately mislead or deceive the company shareholders and the general public. The executives and traders must have also exercised concern and respect for others, including the company’s shareholders and employees, who suffered the most following the company’s collapse.
In conclusion, there are various lessons which accountants can learn from this documentary about the Enron scandal. The main lesson for accountants is to apply the principles of business ethics in their job and always strive to follow ethical standards. In their daily roles, the decisions of accountants should be guided the ethics, and they should always ensure they are doing the right thing. Another lesson is that accountants should not be greed and fraudulent, but carry out their duties applying integrity and honesty. Also, the scandal teaches accountants not to tolerate and promote a culture of deception and unethical behavior, and they should be the first whistleblowers when they notice such behaviors in their organization.
Most importantly, accountants must realize that unethical business will ultimately be exposed, while companies that live by their values, missions, and visions will get recognized by both retail and capital markets. Business codes of conduct are not charades but are practical approaches to day-to-day situations. Ethical corporate cultures will implore employees to do the right thing, and it allows the management to deal with any ethical concerns in a holistic manner to guarantee ethical health. Integrity and ethics are at the heart of sustainable lasting business success. With the absence of ethics and integrity no strategy will be effective, as shown by Enron, businesses will collapse. This is in spite of the business employing some of the “smartest guys in the room.”
References
Cunningham, G. M., & Harris, J. E. (2006). Enron and Arthur Andersen: The case of the Crooked E and the Fallen A. Global Perspectives on Accounting Education , 3 (1), 3.
Fusaro, P. C., & Miller, R. M. (2002). What went wrong at Enron: Everyone's guide to the largest bankruptcy in US history . John Wiley & Sons.
Gibney, A., Klot, P., & Motamed, S. (2005). Enron: The smartest guys in the room.[Documentary]. USA. Magnolia Pictures .
Hatfield, P., & Buchko, A. (2008). Using" ENRON: The Smartest Guys in the Room" As a Live Case Illustration of Financial Concepts and Ethical Issues. Journal of Financial Education , 68-94.
Levin, J. (2005). Enron: The Smartest Guys in the Room: Power, Corruption and Exposing a Corporate Scandal. Screen Education , (40), 30.
