Ethics in Statistics free essay sample

There are a number of possible ways in which unethical behavior can arise in statistics and researchers should steer clear of these. It is relatively simple to manipulate and hide data, projecting only what one desires and not what the numbers actually speak, thus giving birth to the famous phrase â€Å"Lies, damned lies and statistics†. However, this doesn’t happen all the time and there is no reason not to believe in the conclusions of a statistical analysis (Siddharth, 2010). Ethics in statistics is not straightforward and can be quite complex at times.It also greatly depends on what kind of statistical analysis is being done. Unethical behavior might arise at any point – from data collection to data interpretation. For example, data collection can be made inherently biased by posing the wrong questions that stimulate strong emotions rather than objective realities. This happens all the time when the survey is aimed to try and prove a viewpoint rather than find out the truth (Cruz, 2010). We will write a custom essay sample on Ethics in Statistics or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Other unethical behaviors might include scientists not including data outliers in their report and analysis to validate their theory or viewpoint.This happens both in pure and social sciences. By obscuring data or taking only the data points that reinforce a particular theory, scientists are indulging in unethical behavior (Morales, 2010). Ethics in statistics are very important during data representation as well. Numbers don’t lie but their interpretation and representation can be misleading. For example, after a broad survey of many customers, a company might decide to publish and make available only the numbers and figures that reflect well on the company and either totally neglect or not give due importance to other figures.Surveys and polls often indulge in unethical behavior to reinforce a viewpoint. For example, a survey might not reflect true public opinion because it is not statistically significant. However, many surveys do not publish this along with their poll and this can be misleading. As a researcher it is important to be objective and provide the complete picture that has been obtained from the experiment without hiding any details or overemphasizing something for personal gain. Ethics in statistics are important to give the right direction to research so that it is objective and reflects the truth. In February 2001, Enron was named exceedingly unfathomable, meanwhile they â€Å"window dress† their books in effort to hide their debts and Wall Street remained in the dark. August of 2001 Enron’s Vice President Sherron Watkins wrote an anonymous letter to Mr. Lay describing accounting methods that she felt would lead the company to â€Å"implode in a wave of accounting scandals† (North, 2005). On 14th August2001 Jeff Skilling, the chief executive, resigned and was replaced by Kenneth Lay. Mr. Kenneth Lay, once again CEO emailed his employees stating that they expected the company’s stock prices to go up. On the other hand, Mr. Lay sold off his own stock in Enron. Kenneth Lay also took $300 million over three years, for the purpose of services rendered to the company. On 12th October 2001, Arthur Anderson’s legal counsel directed workers who audit Enron’s books to destroy all except the basic documents. The real scandal broke on 16th October 2001 when Enron announced that they loss $638 million, due to â€Å"failure of its internet investment†. Immediately the Securities Exchange Commission (SEC) announced that they were investigating Enron. See, Enron had adopted an accounting technique called the Special Purpose Entity (SPE).Initially Enron used SPE appropriately by placing non energy related business into separate legal entities. On the other hand they tried to manufacture earnings by manipulating the capital structure of the SPE by hiding their losses and they did not have independent outside partners that prevented full disclosure. Also they did not disclose the risks in their financial statements. Enron had made agreements with approximately 3,000 off balance sheet entities. How Enron used SPE’s for off Balance Sheet formatting In order to keep up, Enron to borrowed money to invest into new projects.Enron then created partnerships with lenders to keep the debt off its books. Chewco Investments was one of the partnerships that allowed Enron to keep $600 million in debt off the books it showed to the government and to people who own Enron stock (Norton). Seeing that this debt never appeared in Enrons reports, it made Enron seem extremely financially successful. Enron’s auditing firm, Andersen, one of the world’s five leading accounting firms at the time received millions of dollars the majority of which was not for auditing (North, 2005).Arthur Andersen allegedly applied irresponsible standards in their audits due to conflict of interest over the substantial consulting fees generated by Enron. In 2000, Arthur Andersen was paid $25 million in audit fees and $27 million in consulting fees (this amount accounted for roughly 27% of the audit fees of public clients for Arthur Andersens Houston office). The auditors methods were probed as either being completed for conflicted reasons or a lack of capability to sufficiently assess the financial convolutions Enron employed (Healy ; Palepu, 2003).Enron scandal resulted in shareholders loss amounting to nearly $11 billion when it plunged to less than $1 by the end of November 2001. When the U. S. Securities and Exchange Commission (SEC) began their investigation, Dynegy offered to purchase the company at a fire sale price. Soon that deal fell through and Enron filed for bankruptcy on December 2, 2001. Enron filed under Chapter 11 of the United States Bankruptcy Code, and with assets of $63. 4 billion, it was by landscape the largest corporate bankruptcy in U. S. istory until WorldComs 2002 bankruptcy (Benston, 2003). On the very same day Enron filed for bankruptcy, they slapped Dynegy with a lawsuit for $10 billion, claiming that they breach the contract. The Enron scandal captivated everyone’s attention worldwide. Enron not only robbed $70 billion of shareholder assessment, but they also evaded on tens of billions of dollars in debts. Enron, at the time, employed 20,000 people. The employees of Enron did not only lose their jobs but they also lost their life savings when Enron’s stock dived.Due to the fact that Enron had close to $67 billion owed to its creditors, employees and shareholders were only able to receive limited, if any, assistance aside from severance from Enron (The New York Times, 2003). In order for Enron to pay its creditors, they held auctions selling its assets, such as art, photographs, logo signs, and its pipeline (Vogel, 2003). As investors, we put our trust in the economic system’s â€Å"gatekeepers† (North 2005). We rely on the knowledge and ethical standards of the accountants, the financial intermediaries and government regulators.When gatekeepers fail to inform us, the investors, of companies’ breach of ethics and lowering of standards, they too should be held accountable. Organizations tried avoiding breach of its ethical standards, by increasing the programs and workshops in order to help management and employees develop strong ethical principles. Companies that executed ethical programs have deterred and regulate transgression amongst employees. Organizations identified that effective business ethics programs are good for business performance (Ferrell, Fraedrich and Ferrell 12).Companies realized that not only did ethical practices and fair judgments of employees strengthened employees’ commitment and trust, it also attracted investors. Because employees and organizations were closely linked to consumers, the ethical conduct with the consumer increased the customer grati fication and customer trustworthiness. The use of ethical practice helps motivate employees and steer them in the right direction. It can also prepare managers to make ethical decisions when it is hard to differentiate right from wrong.