Corporate Social Responsibility

Corporate Social Responsibility and the Law

EXECUTIVE SUMMARY

The collapse of large successful organisations like Enron, Parmalat and Worldcom can be traced back to a lack of Corporate Social responsibility within the organisations, particularly, the clear disregard for business ethics and the lack of strong corporate governance within these organisations. These collapses can be attributed to acts committed by individuals and managers acting outside of the authority given to them by the organisation (Li, 2010).The Enron collapse, being the first in a line of successive corporate failures, highlighted issues of corporate greed and unethical business practices committed by its board of directors and senior management which were not brought to the forefront by its accountants, auditors, regulators, analysts or banks (Moncarz et al, 2006).

Commencing in 1985, Enron soon had a portfolio of gas, electricity, paper and communications, with annual revenues growing from US $ 9 billion in 1995 to $ 200 billion in 2001, before it became bankrupt in December 2001 (Li, 2010). This was followed by well publicised court proceedings and sentencing of former senior management of Enron, including the Andrew Fastow (CFO), Kenneth Lay (Chairman) and Jeff Skilling (CEO), who were all found guilty of conspiracy and fraud among other charges.

Enron’s code of conduct highlighted the need for preventative policies and procedures to cover security trading by company personnel, to prevent the possibility of ‘severe’ consequences (Enron Corporation, Code of Ethics, 2000), however adherence to these policies and procedures were not monitored. Investigations into the reasons for the collapse revealed a disjoint between the well written Corporate Social Responsibility that Enron had in place and its internal operations (Corporate watch.org, 2006). It highlighted the failure of senior management and the board of directors to enforce corporate governance policies which led to high risk...