Ethics and Law

Julie November

Assignment #1 Part 2

Johnson & Johnson

1.Johnson and Johnson manufacture Tylenol products. Seven people became sick and died after taking cyanide-laced Tylenol capsules.

2. Johnson and Johnson dealt with the problem immediately and addressed the public through all media outlets, and told consumers not to consume any Tylenol products at all, they went as far as to tell the public not to begin retaking Tylenol procducts until the details and extent of the problem were known. The company completely halted production and advertisement of Tylenol prodcuts and recalled all Tylenol off the shelves of stores.

3. 3 stakeholder groups that are involved are the customers, employees, and shareholders. These 3 groups are vital to the company’s performance and it is necessary to be truthful and ethical to these parties. Honesty, morality, and ethical behavior go far beyond being greedy and all about the money right now.

4. Utilitarianism applies in this case because Johnson & Johnson followed the theory of making a decision to recall all products which in turn maximized happiness and minimized overall pain, therefore producing the greatest net effect. By being upfront with the public they were able to prevent illness and possible deaths. While they lost profit and their stock price decreased for a short time they were able to keep their customers and in turn increase shareholder profitability by not covering up the major mishap.

ENRON

1. Enron and their accounting Firm Arthur Andersen were involved in a huge financial scandal that led to the demise of both companies. Enron created four special purpose entities that were each 3% owned by an independent party, therefore enabling Enron not to include the financial details of these entities on their balance sheet, therefore distorting the overall financial picture to investors. Enron’s auditors were also their consultants and some people had personal ties to the accounting firm. The close knit relatioinship made it easy for coverups to occur, and for the accountant s to reap benefits from covering up unwanted financial data. These entites were operating at large losses, eventually in the billions and when Enron was pressured this all came out. Enron itself was operating at a tremendous loss. Once this became public the stock price plummented, and 5,000 employees were laid off with next to nothing from their severance package that was not able to be honored. Enron filed for bankruptcy and their accounting firm was under large scrutiny.

2. Enron did not deal with the problems they faced as they arised and instead was able to have their accounting firm cover up their losses. Auditing and consulting were being mixed which is known to lead to bad results.

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