On December 2, 2001 Houston based energy, commodities, and service company Enron Corporation
declared bankruptcy.
It's closing stock price that day 26 cents per share.
Not more than a year ago Enron's stock was trading above 75 dollars per share.
So what exactly happened?
Enron's fall from grace is a story riddled with unethical decision making.
From overstating revenues to using special entities to hide its debts, the actions of
Enron forced society to take a closer look at corporate behavior.
Although the specifics of Enron's situation are complex, its problems can be highlighted
by one word: ethics.
Ethics can be defined as a set of moral principles that help us differentiate between what is
right and wrong.
You see just like Enron did over ten years ago, you and I make decisions everyday using
our own unique set of ethical principles.
But what exactly causes us to engage in one behavior over another?
And why is something like making the right decision, such a difficult thing to do?
Unfortunately we won't be able to answer these questions fully in this video, but we can
help shed some light on the one of the factors that has an impact on our morality.
One theory, developed by a psychologist by the name of Lawrence Kohlberg, is known as
the the Stages of Moral Development.
Kohlberg believed that that decisions that a person made were partly based on their level
of moral development.
Expanding upon prior theories, Kohlberg identified three phases of moral development.
These three phases each contain two stages, making for a total of six stages altogether.
According to Kohlberg, as we mature we progress through these stages.
And although an identical decision can be reached by people occupying different stages
of moral development, the rationale or why behind the decision is differs.
The first phase of moral development is termed the pre-conventional level.
This phase is best characterized by self-interest, meaning that people make decisions partly
based on selfish reasons.
In the first stage, punishment and obedience, the consequences of an action determine how
likely someone is to engage in that action.
The primary driver behind decision-making is avoiding punishment regardless of how the
decision-maker really feels about the issue.
So an individual who occupies this stage would be influenced by the potential punishment,
such as California's 10-20-Life law that was enacted in 1996.
This law calls for stricter penalties on individuals who are found in possession of a firearm while
committing a crime.
For example, using a gun during a crime but not discharging it will tack on an extra ten
year prison sentence.
Discharging a firearm during a crime with no injuries would result in an extra 20 years
in prison.
And discharging a firearm with a resulting injury or fatality, that will get you an additional
25 to life on top of sentences for other crimes.
If you were were heavily influenced by the prospect of being punished, and of course
considering committing a crime, California's10-20-life law could provide enough of an incentive to
leave that firearm at home.
The second stage of moral development, and the last of the pre-conventional level is
referred to as instrumental exchange.
At this stage concern is focused more on advancing one's own position, with less of a concern
for punishment.
The phrase You scratch my back and I'll scratch yours best characterizes this stage as reciprocity
plays a significant role.
So despite potentially serving more prison time, someone at this stage of moral development
may decide to use a firearm in some capacity while committing a crime if they felt that
doing so could advance their own position.
Now we venture to the most common phase of Kohlberg's theory, the conventional level.
Decisions made at the convention level are driven by societal expectations, meaning that
people will look to others to determine what is acceptable behavior.
The third stage of moral development, and the first of two at the conventional level,
is what is referred to as the good boy-nice girl stage.
At this stage, the primary driver behind decision-making is what other people are doing.
So in this stage, if your co-workers are using the company credit card for personal use,
or engaging in some other unethical behavior, than you would be more likely to do the same.
The fourth stage of moral development is called law and order.
In this stage, people are oriented towards authority, rules, and maintaining social order.
People still look towards society to determine how to behave, however in this case the established
laws, as opposed to the behavior of others, is the primary driver.
So if using the company credit card to pay for your family dinner is against company
policy, and it probably is, then you will likely avoid this behavior despite the actions
of others.
In the third and final phase of moral development, people make an effort to define their own
moral values and principles outside of the law and what society deems appropriate.
This phase is referred to as the post-conventional level of moral development.
In the fifth stage, the social contract stage, people consider laws like in stage four, however
they also incorporate their own personal values and opinions.
So the law is really a starting point to decision-making, as opposed to the only factor as in stage
four.
Outside of the law, social utility, or what is in the best interest of societies members
as whole, will be considered when evaluating a particular situation.
As an example, you may decide that committing a crime like robbery is morally wrong, not
only because it is clearly against the law, but is also infringes upon the rights of society
members.
The sixth and final stage of moral development is known as the universal principle stage.
In this stage, what is determined to be right is based upon individual ethical principles.
These principles tend to be universal principles of areas such as justice, reciprocity, equality
of human rights, and respect for the dignity of human beings as individual persons.
You're probably familiar with the golden rule, which is another popular universal principle.
At this stage, people will maintain behavior that is consistent with their established
principles regardless of the law or what is best for society as a whole.
Kohlberg believed that although we progress through these stages in order, not everyone
reaches the final stage.
In fact, Kohlberg argued that only twenty percent of adults ever reached the post-conventional
stage.
So where does everyone end up?
Well most adults actually occupy the conventional stage of moral development, which if you recall
relies on society as a gauge for acceptable behavior.
Could this be an issue?
Going back to our discussion of Enron, many would agree that the unethical decisions that
were made came from the top of the organization.
But if a majority of people rely on others to determine what is right or wrong, could
it be that employees of Enron went along with top management decisions because they were
in fact looking to them to determine acceptable behavior?
Truthfully I don't know the answer for certain, but it does raise a rather interesting question.
Can unethical behavior from a few influential individuals affect the behavior of others?
I think for the most part, the answer is yes.
This has been Kohlberg's Stages of Moral Development.
For questions please leave them in the comment box below and I'll do my best to get to them
in a timely fashion.
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Thanks for watching.