Running head: ORGANIZATIONAL SCANDALS

ORGANIZATION SCANDALS: Three Case Studies of Failed Ethics

Loren Smitley

Arizona State University

OGL 345- Module 01

March 17, 2022

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ORGANIZATION SCANDALS: Three Case Studies of Failed Ethics

Section 1: What is Ethics?

BBC (2014) states that:

At its simplest, ethics is a system of moral principles. They affect how people make

decisions and lead their lives.

Ethics is concerned with what is good for individuals and society and is also described

as moral philosophy.

The term is derived from the Greek word ethos which can mean custom, habit, character

or disposition.

Ethics covers the following dilemmas:

● how to live a good life

● our rights and responsibilities

● the language of right and wrong

● moral decisions - what is good and bad

Our concepts of ethics have been derived from religions, philosophies and cultures.

They infuse debates on topics like abortion, human rights and professional conduct.

I chose this definition because I liked that it explained the origin of the word and

delineated that “ethics” is not a one size fits all scenario but is actually dependent on several

factors. The main factors being the welfare of the individual, the welfare of the society, and the

philosophy of right and wrong. In short order it is not something to be taken lightly as it will often

take some thought to arrive at a conclusion/action that is ethical, and from experience the time

to act is not the time to figure it out. So ethics is something to collaborate and decide on before

moving into the field of action.

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Section 2: What is your Chosen Profession?

I intend to field a career as an Organizational/Business Executive. My service in the

United States Navy has been focused around operations management, strategic plan

development and execution, policy development and implementation, and program/project

review and maintenance. I intend to further build on this foundation and continue on a similar

career path that will capitalize on my experiences so far.

Section 3: Case Study 1 - ENRON Scandal

Enron was an American energy company that stemmed from a merger led by Kenneth

Lay between Northern Natural Gas Company and Houston Natural Gas in 1985. Enron caused

the loss of ~$74 billion in the final years before it claimed bankruptcy in 2001 largely due to

accounting fraud (Enron Scandal, 2022).

In layman’s terms Enron would purchase/create companies/projects and claim the

potential projected cash flow for these endeavors as the current revenue. Many and most of

these endeavors actually did not produce the predicted revenue. Instead of indicating this on

Enron’s balance sheets Enron’s executives instead covered it up by tying the losses to the

companies associated with the endeavors; this made Enron look profitable when really it was

losing substantial amounts of money (Segal, 2021).

Enron could have created balance sheets that were transparent in declaring the

monetary losses experienced by the company's endeavors. This would have led to a downgrade

in the standing opinion with investors and an eventual downgrading in the company's credit

rating. This in turn would lead to a loss of cash flow for the company limiting what it could do

and provide for its current investors.

I chose this ethical dilemma because it is all too easy to get into a rut of making

something work to promote an organization, especially when not many understand what is
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happening to make such plans a success. The Enron executives knew they were covering up

losses and were still taking money (even from their own employees … the life blood of the

company!) and giving out loans with nothing to back them with other than their false credentials

in the stock and bond markets.

The key takeaway for me is to be aware of how the perceived perception of an

organization could have a devastating effect on the structural and financial integrity of an

organization and its associated society if used unethically. The use of the organization’s fame

for the gain of the organization (or really the organization’s executives) at the significant loss of

everyone else is both volatile and wrong; it should be guarded against for the safety and well

being of the markets and its associated investors.

Section 4: Case Study 2 - Deepwater Horizon Oil Spill

On April 20th 2010 a 9 year old mobile floating drilling rig named “Deepwater Horizon”

was chartered to BP and drilling a deep exploratory well. The operation was ~41 miles off the

coast of Louisiana. At approximately 7:45 pm CDT a high-pressure methane gas rose into the

oil rig and exploded consuming the entire drilling rig. This led to 11 people missing, later

declared deceased after search and rescue efforts concluded and 70,000 sq miles being

affected by the oil spilled into the gulf (roughly the size of Oklahoma State). In 2013 the clean up

cost BP alone over an estimated $14 billion (Deepwater Horizon oil spill, 2022).

From the investigation it was found that there was indeed criminal activity conducted in

seeking to cover up the negligence harbored by engineers and supervisors to support a faster

recovery of oil at a cheaper cost leading to a larger profit gain for BP, Halliburton, and

Transocean. It was also noted that some of the blame also stemmed from an assumption by

government officials that the industry was rooted in safe operations which in turn led to a lack of

regulatory oversight, which was needed to mitigate such catastrophic risks being taken by the

industry (Deepwater Horizon oil spill, 2022).

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There were several clear decision points that could have been capitalized on to prevent

the catastrophe. The first was the blatant disregard for pressures reported at the drill site that

were reported the day prior. Another decision point would have been when BP ignored a report

of the failed pressure test for materials being commissioned for use in containing pressures from

drilling operations. The overarching problem however was that these companies were more

concerned about profit than the potential risks inherent to the line of work and the associated

devastatingly broad spectrum of effect there would be if the operation failed to contain the

resources being mined.

I chose this ethical dilemma because it was not just limited to the company executives

but the culture fostered within the organization. From the investigation it was noted that there

was not an emphasis on the need for safety and the inherent risks associated with the

operations and the impact that such failed operations would have on the local area, and society

as a whole.

This will be important in my field as I will need to pay attention to cultures generated

within the organizations I associate with and the direct link actions will have on society and the

environment they operate in. Bearing in mind that organizations do not stand alone but are

instead a part of the greater whole, our society, the human family, and ultimately Earth (you

know … everyone’s home).

Section 5: Case Study 3 - Oxfam Scandal

Oxfam was established in 1942 in Oxford, England; it was established by a group of

Quakers, social activists, and Oxford academics with the goal of alleviating famine caused by

the Axis occupation of Greece (Oxfam, 2022). Oxfam is still a non-profit organization that is

deeply rooted in providing humanitarian relief in emergent situations as well as advocating for

the poverty stricken populace of the human family by reporting on the ever growing rift between

the world’s wealthy populace and the poverty stricken populace. Additionally they proactively
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pursue campaigns in fair trade practices, opposing of high tariffs on imported goods, restriction

of product sales from other nations, unbalanced labor rights for women, and stringent patent

issues which isolate developing countries from access to goods which establish better quality of

life for basic human needs i.e. software, textbooks, chemical patents, and medication (Oxfam,

2022).

In 2010 Oxfam had 230 staff in Haiti to support the humanitarian aid of Haitians suffering

from the catastrophic effects of an earthquake that claimed the lives of 220,000 and injured

300,000 and consequently left 1.5 million people destitute. Oxfam had an ~$92 million to

contribute to the endeavor of rebuilding the infrastructure for the country.

In 2011 whistleblowers from the Haitian relief group reported serious allegations of

sexual misconduct by senior colleagues living at the apartment complex rented by Oxfam with

money donated to the organization for the purpose of providing relief to the Haitian populace.

O’Neill (2018) reported the following statements from sources that had access to the

whistleblower reports for the events and subsequent conduct of the senior colleagues in Haiti:

Sources say they gave an account of serious sexual misconduct by a group of male aid

workers living at a charity residence in Delmas, near Port-au-Prince. They had detailed

notes and records of conversations with witnesses.

“The group lived in a guesthouse rented by Oxfam that they called the ‘pink apartments’

— they called it ‘the whorehouse’,” said a source who says he was shown phone footage

by one of the residents of the guesthouse.

“They were throwing big parties with prostitutes. These girls were wearing Oxfam

T-shirts, running around half-naked, it was like a full-on Caligula orgy. It was

unbelievable. It was crazy. At one party there were at least five girls and two of them had

Oxfam white T-shirts on. These men used to talk about holding ‘young meat barbecues’.
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The group was said to have control over the team of drivers hired by the charity to move

staff. A source said: “They said, ‘Listen, if you want your contract to be extended we

need girls and you need to pick them up’.

O’Neill (2018) goes on and states that Oxfam supported the UN inter-agency standing

committee on protection from sexual abuse and had established a clear policy of zero tolerance

toward sexually abusive or exploitative acts being perpetrated by their employees.

Despite this clear standing within the organization efforts were undertaken to remove the

corrupt employees and discreetly dismiss the case from public view to maintain Oxfam’s public

perception. Oxfam later released a statement after dismissing those involved in the crimes from

the organization that there were some instances of misconduct but that none of the donated

funds for the Haitian relief was related to any fraud.

It was later discovered as an external investigation was launched that these instances

were indeed related to negligence of leadership and that funds were indeed wrongfully used for

the personal gain of those participating in the grievous acts, which is the very definition of fraud.

Oxfam was banned from requesting government funding and many of the supporters

withdrew their support and was only recently allowed to make such requests after proving that

they did indeed have a sufficient level of accountability and transparency necessary to function

as an international non-profit organization.

I chose this case because despite the best efforts of non-profit organizations it is

undoubtedly going to acquire rotten eggs whose sole purpose is to infiltrate and commit

fraudulent acts to further their own personal agenda at the costs of others. However, Oxfam

should have immediately made public the deplorable acts of its employees and took a clear

public stance against them and their conduct. Not surprising that Oxfam continues to this day to

have issues with employees that do not respect the clear ethically sound policies of the

organization because they continue to foster an approach of cover up to facilitate the positive
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perception of the organization. The takeaway here for me is that when there are clear ethically

sound policies in place to protect the individual and societies affected by the organization, those

policies must be adequately and publicly enforced if they are to have any real efficacy on the

organization as a whole.
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References:

BBC. (2014). What is ethics?. BBC. Retrieved February 16, 2022, from:

https://www.bbc.co.uk/ethics/introduction/intro_1.shtml#h2

Cage, M. (2018, February 19). The Oxfam scandal shows that, yes, nonprofits can behave

badly. So why aren’t they overseen like for-profits?. Washington Post. Retrieved

February 17, 2022, from:

https://www.washingtonpost.com/news/monkey-cage/wp/2018/02/19/the-oxfam-scandal-

shows-that-yes-nonprofits-can-behave-badly-so-why-arent-they-overseen-like-for-profits/

Deepwater Horizon oil spill. (2022, March 14). In Wikipedia.

https://en.m.wikipedia.org/wiki/Special:History/Deepwater_Horizon_oil_spill

Enron Scandal. (2022, March 02). In Wikipedia.

https://en.m.wikipedia.org/wiki/Enron_scandal

O’Neill, S. (2018, February 09). Oxfam in Haiti: ‘It was like a Caligula orgy with prostitutes in

Oxfam T-shirts’. The Times. Retrieved March 17, 2022, from:

https://www.thetimes.co.uk/article/oxfam-in-haiti-it-was-like-a-caligula-orgy-with-prostitut

es-in-oxfam-t-shirts-p32wlk0rp

Oxfam. (2022, March 12). In Wikipedia.

https://en.m.wikipedia.org/wiki/Oxfam

Segal, T. (2021, November 26). Enron Scandal: The Fall of a Wall Street Darling. Investopedia.

Retrieved March 16, 2022, from:

https://www.investopedia.com/updates/enron-scandal-summary/