The role that ethics plays in strategic management has changed drastically in the last 20 years. It was rare to find companies that had ethics in the forefront of their management plans in the 1990s. Business was all about maximizing profit/shareholder equity. Incidents like Enron’s bankruptcy caused a big change in management style. “Enron’s failure in 2001 represents the biggest business bankruptcy ever while also spotlighting corporate America’s moral failings. ” (Silversmith, 2013) That spotlight showed a moral environment fraught with greed and shortsightedness where long term growth for companies was concerned.
New government regulations on business make it more important that the Board of Directors, CEO and CFO takes more responsibility for how they run the company. Shareholders are also demanding more of the leaders of businesses. For a time, shareholders did not pay attention to how the company was run as long as they received their dividends. Now they are are much more aware. Many people were hurt financially by the bankruptcies and re-valuations of those companies with questionable practices. Pursuit of profits is no longer the main emphasis for many companies.
The emphasis is now on ethical issues including environmental, employee satisfaction, and consumer satisfaction. “Ethics and integrity are at the core of sustainable long term success. ” Says Richard Rudden, managing partner at Target Rock Advisors in New York State. “Without them, no strategy can work, as Enron demonstrated, enterprises will fail. That is despite having some of the ‘smartest’ guys in the room. ” Another area that was affected by the lack of corporate ethics was the mortgage industry. Regulations were relaxed, and some larger banks took it as a chance to make a lot of money very quickly.
They wrote bad loans for people that could not pay. Using sub-prime methods led to a lot of people that could not afford to buy a home getting mortgages. When they could not pay, the banks found is financially more advantageous to foreclose rather than try to work with the borrowers. They are still doing that to this day, even with government mandated refinance programs. Unfortunately, some people/organizations take longer to learn a lesson than others. References Silversmith, K. (2013, May 14). Enron, Ethics and Todays Corporate Values. Retrieved from Forbes. com.