After watching the 2005 documentary of Enron: The Smartest Guys in the Room, I was able to reflect a lot of things pertaining to various aspects of the said documentary. In this film, it showed how the company had risen from manipulating financial data and fell when they could no longer find any measures to stop the bleeding of the company's accounting fraud. This story actually still applies up until today. Based on my further readings about this issue and other bankruptcy-related issues, it was thought that Enron had the worst financial collapse but companies like Worldcom and Lehman Brothers had more troubles in terms of the amount of assets that's been lost.
THE BULLY
Survival of the Fittest: A Darwinian Theory
When Jeff Skilling decided to apply what he'd experienced during his MBA in Harvard University in which 15% of the people will be graded either a low pass or fail.[1] He did this in Enron wherein they have their annual performance review system in which employees are being rated from 1 to 5 with 5 being the lowest. In this scheme, 15% of their employees have to be graded a "5" even if they performed exceptionally well. Skilling said that this enables to weed out the under-performing ones and kept the remaining ones to be more competitive.
However upon watching, I realized and asked myself that how could the company be able to sustain this for a long time? In this case, it meant that employees are required to be competitive and not help each other in order to stay in this company since helping them would mean that they might be the ones that would be weeded out. So if this is their mentality, there is really no way that the company would be able to sustain this since the continuity would be lost, which actually reflected in their real financial profits. Instead of fostering a healthy environment, in which the colleagues would be able to interact with other co-workers harmoniously, they are making the environment a hostile one by knowing that if they do not perform well against their peers, they will be weed out. I understand that companies must put a quota or a basis for performance in order to avoid having free riders; but then, having a quota would mean that employees will compete with each other in order to get the said sale or transaction. I think there should be a balance between this two things, if all of the employees indeed did perform above the company's expected results then nobody should be weed out for that and vice versa.
This scenario is especially true in salespersons in a store. Perhaps they have a quota that they should reach in a day, it is just that they may not be weed out for failing it and instead being rewarded for exceeding it. In one instance, I was looking for a pair of shoes, the saleslady indeed assisted me at first; but when I was about to ask for a new stock, she was nowhere to be found and I decided to look for another sales person to ask for a new stock. A salesman assisted me by looking for a new stock and when I decided to purchase the shoes at the counter, the saleslady who first assisted me then went straight to the cashier and told her that the shoes that I bought should be named to her (perhaps in terms of number of shoes sold), then the salesman showed up and told the cashier that it is supposed to be his and even wanting me to verify that he's the one who assisted me in choosing the shoes.
Cheating and Greed: How much is too much?
My college Filipino teacher used to tell us that it is better to kill than to steal. I was wondering what made him say so where in fact the punishment for killing is heftier than that of stealing. His reason was that a person do not have any excuse for stealing. A person cannot say that he is poor that's why he stole since the victims would also say they are also earning for a living; however a person can somehow defend himself that he killed the person for self-defense if he/she was really being abused.
It is really true that love of money is indeed a sign of greed or sin, which is why it is not surprising that greed is one of the seven Cardinal sins. How much do the Enron executives need to earn in order to be satisfied with they money they are receiving? How much higher does Enron want the stock price to go up despite their schemes almost being unsustainable in the first place? How many times they have to let their morals be compromised in order to have personal or company gain?
We all know cheating is bad, there was even a saying by some students that it is better to cheat than to repeat. I also heard one of my classmate somehow said that she does not have any conscience by committing cheating anymore. From a financial and time standpoint it is true that you have to cheat in order to pass so that you won't spend another year just to finish a particular level and save money; however, a person's moral standard has been tainted or there is a conscience on the part of the offender. In addition, if a person kept on having a mentality of thinking that they are only committing a small crime and they are not harming the majority; then we would have a problem in which a series of small problems can lead into bigger ones until the habit kept on compounding and compounding, which will now be in a form of greed that you cannot live without it.
I personally think that we really should practice proper ethics and hope that we still have a conscience left in our hearts so that we can still humble ourselves and admit to God our sins. In addition, let us not allow ourselves to let a small sin taken for granted as we all know we might never know that disregarding small sins are already starting to become a habit, which as we know is difficult to change.
THE OPPRESSED
Sadistic Approach
A sadist is said to be someone who loves to see people getting hurt. In the Enron incident, we saw some executives are happy that they are weeding under-performing employees. Like the saying goes, when the lower ranked employees saw how their bosses project themselves, they too would be like them. In the documentary film wherein they know that the State of California is suffering from energy crisis, the traders took the opportunity to earn more profit by telling the power plant operator to shut it down in order to force the consumers to pay more for the electricity. These continuous instance made traders to become sadistically happy about it by hearing the citizens scream of fear and even saw forest fires due to summer heat, etc.
What they did there was actually very alarming since they did not care how many people would be affected by their evil plans just to succeed with their task. People of California were suffering during that time and it was like the screams and fears seem to be a music to the ears for these executives as they know that they would gain more profit because of an artificial shortage of power that's been caused by them.
Aside from this, the executives are encouraging their employees to invest in their company through buying stocks. Little did this people know that they are investing in a company that sooner or later will go into bankruptcy. It was just sad that this people put their earnings into something that would be of no use to them since they believed their executives are doing these things for the benefit of the majority.
THE INDIFFERENT
Brave Souls
The world is not really a polarizing place, it is just that we would need people who are brave enough to see and to fight that there is really something wrong with a certain situation. These people are said to be the indifferent ones as they had opposing views from the majority. Also this people are willing to take risk by facing the consequences of their action by doing what is right.
Such issue is when Enron starting to become the darlings of the Wall Street in early 90's, most analyst kept on recommending a "buy" on Enron except for John Olson, who thought that there is no way the company would keep their earnings that high. This made the Enron upset about Olson, who was working under Merrill Lynch, which Enron eventually made Merrill Lynch fire Olson because of not following the trend of the other analyst.
Eventually, another analyst saw an eerie trend in the company's financial statement that was discovered by Jim Chanos and assisted by Bethany McLean, a former writer of Fortune magazine who dared to ask Skilling a simple question such as how does the company earns money? There is even one analyst, who forced Skilling to lose his composure during the conference call, by asking they are the only company who does not report balance sheet and cash flow, which are one of the bases to determine the health of the company.
Lastly, Sherron Watkins, who is the whistle-blower of Enron took a risk by telling the truth to the public despite knowing that she would lose her job or might be charged with libel by Enron executives. She should be admired here as she bravely told everything the stakeholders need to know. Even though it already caused a lot of people, especially the employees trouble, at least she was able to raise her concern immediately when she found out that there is something wrong with the company's financial statement.
FINAL THOUGHTS
This situation should serve a lesson for all of us whether we are directly affected or indirectly. We do not need to experience these things just for us to realize the lesson behind it. Up until today, we know that there are a lot of companies that are still violating ethics in relation with providing accurate accounting data. Perhaps this is the result of the poor government rules and regulations that forced the companies to find a loophole in a situation. In the US, because they are charging high taxes for corporations, US based companies like Pfizer who are in talks with Dublin-based Allergan for merging so that Pfizer would have tax inversion in which they will mention that their headquarters is based in Ireland not in the US. [2]
In the Philippines, foreign investors do not want to invest in the Philippines because of the tedious requirements of applying for business permits. Businesspersons who are managing a small store cannot keep up with the demands of the government due to the demand of wages and other benefits such as SSS, PhilHealth, etc. Aside from this, the government sometimes accuse of businesspersons that they are not filing the right tax. The problem here is that what has been taught in school is not the same as what is being applied in the real world. I used to remember when I answered my accounting professor's question and he would say it is "theoretically correct", then he would explain this is what the government is doing. Also, if there is someone who is willing to learn how to compute the right taxes, the government does not give the answer and instead want the bribery for their personal money. The person not only lost more money due to unethical practice, he/she did not learn anything.
I really think that this goes both ways, if the government indeed want to stop corruption and force the employees to pay the right taxes, perhaps they should tell them what is the proper computation or lower the taxes to encourage businessmen to open more business so that there will be lower unemployment, reduce poverty and eventually improve the economy as a whole.
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