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Abstract

A rash of recent corporate scandals has once again put professional ethics in the spotlight. It's hard to pick up the Wall Street Journal each day and not read that authorities have launched a new investigation or that additional indictments are imminent. Stories of financial fraud and outright looting have galvanized the public and shaken the economy. What ethical lessons can we draw from these events? Two explanations seem especially prominent. The first is a story of individuals without an adequate moral compass. Some people's greed and ambition were unchecked by any internal ethical constraints. For such deviants, no amount of money was enough and no level of consumption too high. One trader at Enron, for instance, reportedly paid $6250 a month for an especially desirable parking space. For people like that, the basic problem was flawed character. The lesson is that we need to make greater efforts to transmit moral values and sensitize people to basic ethical precepts. The second story is of individuals who did have a sense of right and wrong, but who buckled under organizational pressure. Enron pushed its executives to devise ever more questionable schemes to keep apparent profits growing and its stock price high. Arthur Andersen auditors felt pressure to accept Enron's numbers in order to preserve millions in consulting fees from the company. In this story, some people knew the right thing to do, but lacked the fortitude to do it. The problem therefore was organizational corruption. The lesson is that we need to provide people in organizations greater protection from retaliation for sticking to their values.

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