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The Role of Corporate Governance and it's Ethical Responsibilities (Case of Enron).

Byrne, Niall Patrick (2003) The Role of Corporate Governance and it's Ethical Responsibilities (Case of Enron). Undergraduate thesis, Dublin, National College of Ireland.

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Abstract

In the space of less than a year, Enron Corporation, one of the biggest companies in America collapsed, how did this happen? Many people believe that the Enron debacle was caused by a failure of Corporate Governance, in particular the board of directors monitoring responsibilities. Yet Enron followed many 'best governance' practices and at one stage, was even voted as having one of the best corporate governance structures in America.

The Nobel Prize winning economist Milton Friedman argues that "there is one and only one responsibility of business - to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." Friedman (New York Times 1970) An understanding of the corporate governance failures at Enron should lead to the recognition that many of these failures where actually the result of management trying to increase shareholder value and that Enron was run well as a business for profit, but it failed when individuals started to use the company as a vehicle for their own individual self interest.

Thomas Hobbes, the seventeenth-century English philosopher, believed that it is natural to act in one's own self interest, but when individuals are left to pursue their individual self interest unrestrained, it results in what he calls a 'state of nature' where everybody is at war with everybody else. He further argues that businesses like individuals, need a moral conduct within which to operate as without it they cannot function The aim of this dissertation is to show that the focus on profit coupled with the unethical environment created at Enron ultimately caused the Enron debacle. At Enron, everybody pursued their individual self interest, yet while there was a code of Ethics in place it never was enforced and just as Thomas Hobbes described, a state of nature ensued, resulting in the firm's collapse.

Item Type: Thesis (Undergraduate)
Subjects: H Social Sciences > HD Industries. Land use. Labor > Large Industry. Corporations. > Corporate Governance
H Social Sciences > HF Commerce > Business Ethics
Divisions: School of Business > BA (Honours) in European Business and Languages
Depositing User: SINEAD CORCORAN
Date Deposited: 05 Aug 2010 10:30
Last Modified: 19 Aug 2014 09:29
URI: http://trap.ncirl.ie/id/eprint/364

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