Corporate Social Responsibility: who does it help?

If you haven't taken SOM 301 at George Mason yet, then you may not know what corporate social responsibility. So what is it, you ask? Corporate social responsibility, CSR, for short, is the "corporate initiative to assess and take responsibility for the company's effects on the environment and impact on social welfare," according to Investopedia.com. Simply put, CSR is what companies do to help their community, and in turn, their image. When CSR first emerged, businesses were only focused on making the company look like it was invested in the community, when really, it wasn't. Now, however, it is different.

Lately, many businesses have been focusing on the environment. The "Green Movement" we have been experiencing the past few years have really influenced the way businesses act; businesses now are becoming environmentally responsible and investing in environmental sustainability programs, alternative energy, and various social welfare initiatives to benefit employees, customers, and the community at large. 

CSR goes beyong the traditional measures of profits and the bottom line to include environmental and social dimensions. Nowadays, businesses are under a lot of pressure from the public, based on the previous instances of tax evasion, corruption, and fraud. According to Guardian News, governments are now realizing that businesses need to take responsibility for their impacts on the environment, further enforcing CSR. Personally, I think companies should engage in CSR, not to make themselves look better, but because they really care about their community. What does your dream company do in terms of CSR? If you were the CEO of a company, and had unlimited funds, what would you invest in? 

Accounting Ethics vs Life Ethics

I recently stumbled upon a blog that was ALL about ethics. Imagine how excited I was?!

I never really thought about the different between accounting ethics and life ethics. I guess it just seemed common sense to me - like the difference between a granny smith apple and a golden delicious apple, they're taste different, but in the end, they're both apples. I imagined ethics would be the same - different areas, but same concept.

According to this blog, written by a CPA and author of multiple ethics, fraud, and accounting articles, what I thought is actually right. You have to integrate life ethics into business ethics. Think about it - why wouldn't you? If you lived your life knowing you shouldn't lie to your parents or your friends, then why would you lie to your boss or your coworker? Each day, we are faced with decisions that may affect someone else's lives - if we buy a donut at 711, we will be generating revenue for 711, if we drive, we will add to the traffic on I-95, and when we need gas, we'll be helping gas stations and in turn the economy. There is nothing you can do that will only affect you, so why not live your life the same way in every aspect?

One thing I learned from the blog is that not only has there been multiple cases of fraud, but two of the remaining big accounting firms have also faced being under the microscope for ethical concerns. In the end, I believe that accountants should be as ethical in the workplace as they are in their personal lives. Scratch that, every one should be as ethical in the workplace as they are in their personal lives. Are you?

Ethics in Schools

Ethics, simply defined, is the difference between right and wrong. While this area is sometimes not clear, ethics is a vital portion of business classes. Large quantities of time are spent talking about past scandals and the norms and values of ethics, so that history does not repeat itself. Nowadays, students are learning more about how to react in a potentially unethical situation. Ethics is about the quality of lives, service, and ultimately, the bottom line. Treating employees, customers, vendors, the community, and the public in an ethical, fair, and open way is the only way a company will stay in business. 

So far this year, I have learned about ethics in two classes - accounting and SOM 301. I think that more classes should be focusing on business ethics, especially for business students. The choice between right and wrong may not always be black or white, there may be some grey area. In high schools, you hear about students getting expelled or suspended from school due to cheating. But are teachers teaching kids how not to cheat? Each school has a set of ethics, which aren't rules, but guidelines as to how you should act. It seems reasonable that this set of guidelines shouldn't change from school to school, so why are the punishments different depending on what you do? In one school, you could cheat on a homework and get a zero for that, but in another school, you could get suspended. The National Association for Social Workers in Massachussets says that schools should practice "preventative ethics." This way, students learn what to do, before they learn what NOT to do. 

Personally, I was taught by my parents what was wrong and what was right - not to copy off of someone else, always do everything myself, and to always take pride in my work. School just reinforced all the values my parents had instilled in me as a child. Who taught you?

Enron Energy : Its Rise and Fall

** All statistics taken from Journal of Accountancy **

Many people do not know the history of Enron - how it came to be, and how it came to be today. It's important to know how companies can evade reporting debt and what the government can do to stop it. Today, I'm here to tell you how Enron did it.

Enron was born from the merger of Houston Natural Gas and InterNorth, a pipeline company, in 1985. In the process, Enron incurred massive debt and lost the rights to its pipelines. As a result, the company CEO, Kenneth Lay, hired Jeffery Skilling to help develop a new business strategy to create cash flows. Skilling, a banker and consultant who had a background in asset and liability management, proposed that Enron create a "gas tank" where they would buy from suppliers and sell it to customers. Skilling's idea was so good that Lay made another division of Enron called Enron Finance Corporation. Business was booming, and Enron soon dominated the market for sales of natural gas.

A few years later, after much success, Skilling became COO of Enron. He convinced Kenneth Lay that that same model could work for the electric energy business. Well, it did. Enron's revenue grew from $2 million to a whopping $7 million in a year. By 1999, Enron had been named, multiple times, to Fortune Magazine's "Most Innovative Company in America," as well as one of the top 100 companies to work for. However, America didn't know that Enron was hiding billions of dollars in debt by using Special Purpose Entities. SPE's allow a company to increase leverage without having to report debt on the balance sheet. In addition, Enron transferred assets into SPE's to not have to include the devaluation of them in the books. In late 2000, the company included this in a confusing footnote at the end of their financial statements.

By Feburary 2001, the CEO had retired and named Skilling the new CEO. From this point on, the stock for Enron began quickly falling in value, falling from nearly $90 to a mere 26 cents by the end of 2001. After a lengthy inspection with the Securities and Exchange Committee, the company dissolved and merged with their competitor, Dynergy.

That is the story of Enron's demise. Unfortunately, the company has made a horrible dent for the accounting profession, but luckily for the new generation, the government has made a large amount of changes to how businesses report things on their financial statements and what companies can and cannot do. Personally, I think that although the Enron scandal has made many people question the accountability of companies, it made the business world much better and safer, and ethical standards have been raised substantially. What do you think?

"Golden Rule" of Business Conduct

This blog has made me start looking into the news more often. Just yesterday, I read an article on the Better Business Bureau about a "Golden Rule" of business conduct. The Golden Rule consisted of something called the "Four Way Test." This test proved to create a climate of trust around the dealers, customers, and employees, and improved the company's reputation by avoiding puffery and false statements.

The questions asked were:

• Is it the truth?
• Is it fair to all concerned?
• Will it build goodwill and better friendships? and, 
• Will it be beneficial to all concerned?

As of today, this Four Way Test is the guideline for ethical business practices in many companies. The article spoke about whether a company could afford good business ethics, and it proved that many companies could. However, the author, Holly Doering, also put out an interesting thought - business can't afford to NOT do the right thing. What do you think? Can a business have good ethical practices without sacrificing anything else?