Sustainable advantage of an organization can be determined by its ethical capability. Ethical capability of an organization is its duty to do what is right. Some organizations such as Enron, Sathyam, and Tyco etc have made false statements in their accounts and cheated both the stakeholders and government. These kind of issues gave rise to the importance of business ethics in business schools all around the world.
Sustainable advantage can be defined as the beneficiary element that determine the long term objectives of an organization, where objectives would be the economic development that generates wealth and meets the needs of the current generation while saving the environment, so future generation can meet their needs as well. There are number of factors that determine the sustainability of an organization, which are its ethics, strategy, employees, financial capital etc. in present scenario, human resource of an organization considered to be its competitive advantage, but it will not provide sustainability. Sustainability of an organization will depend on the impact it has on the people, in the form of trust, honesty, integrity, respect, quality and responsibility. Organizations with poor sustainability will fall back as happened in case of Enron and Sathyam.
Enron was an American energy company founded in 1985 by Kenneth Lay after merging Houston natural gas and internorth( citetation). In early 1990′s Enron sold electricity at market price. At around the same time US congress passed a bill regarding the deregulation sale of natural gas which favored Enron to sell energy at higher prices. In 1992 Enron was the largest merchant of natural gas in North America. Online trading model developed in November 1999 known as Enron online has developed and extended the abilities to negotiate and manage its trading business. By 2001 Enron had both owned and operated gas pipe line, pulp and paper plants, broad band assets, electricity plants and water plants internationally. Enron stock was priced at US $ 83.13 and market capitalization exceeded US$60 billion, and Enron was rated the most innovative large company in America in fortunes most admired companies survey. By the end of 2001 the Enron scandal was revealed. The CEO Jeffrey Skilling with some of the executives have hidden billions in debt from failed deals and projects. Chief financial officer Andrew Fastow and the other executives were able to mislead the board of directors and audit committee by presenting them psydo account statements. Once the scam was published the Enron stock priced at $90 per share in 2000 plummeted to less than $1 by the end of November 2001. This fall in stock value has caused at $11 billion loss for its share holder. The employees of the organization received a limited amount of their salary and pension when it was bankrupted. Several law suits were filed against the company CEO and other executives. » Read more: Ethics in Business