Enron Case Study

692 Words2 Pages
bulb-icon

Recommended: Enron ethical violations

1. Enron was holding on by a thread. The traders were told by the Enron executives to do whatever it takes. This meant crossing all sorts of ethical boundaries just to get a spot as a top Enron trader. Enron went to great lengths to try and fake it's income. “When Jeffrey Skilling, a key player in this scandal, was hired, he developed a staff of executives that, by the use of accounting loopholes, special purpose entities, and poor financial reporting, were able to hide billions of dollars in debt from failed deals and projects. Chief Financial Officer (CFO) Andrew Fastow and other executives not only misled Enron's board of directors and audit committee on high risk accounting practices, but also pressured Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world, to ignore the issues” Enron kept finding different ways to hide their debt. They used an accounting method called mark-to-market accounting. This accounting method is based on market value, which was then inflated. While using the method, income from projects could be recorded, although they might not have ever received the money. The tipping point for Enron was when Bethany McLean, a Fortune Magazine reporter, questioned how Enron made its money. Investors started to get worried and sold their stock. When Jeffery Skilling finally realized that Enron was in so much debt and there was no way out anymore, he up and left the company. He told everyone that he was leaving for family reasons. This was the final blow for the company.
2. The top executives of Enron were smart, successful individuals as well as the investors from the large financial institutions, corporate lawyers, and accountants from the largest accounting firm at the ...

... middle of paper ...

...antly increasing its revenue. The company’s stock increased 311% from the 1990s until 1998. If these top executives didn’t get so greedy and gamble with Enron’s money, the company would have never fallen as bad as it did. What changes should be made in order to keep this from happening again? Enron should start using ethical business practices and stay away from appointing greedy individuals to top managerial positions. Enron was originally led by very smart individuals. But, as time went on and they started to not only work for the company but become the company, these individuals got greedy and made risky decisions, gambling with Enron’s money. Enron and the individuals that were originally in top managerial positions have learned from this experience. It goes to show that companies that don’t practice ethical business decisions have a great chance of crumbling.

Show More
Related

  • Analysis Of The NASW Code Of Ethics

    700 Words  | 2 Pages

    Many organizations have been destroyed or heavily damaged financially and took a hit in terms of reputation, for example, Enron. The word Ethics is derived from a Greek word called Ethos, meaning “The character or values particular to a specific person, people, culture or movement” (The American Heritage Dictionary, 2007, p. 295). Ethics has always played and will continue to play a huge role within the corporate world. Ethics is one of the important topics that are debated at lengths without reaching a conclusion, since there isn’t a right or wrong answer. It’s basically depends on how each individual perceives a particular situation. Over the past few years we have seen very poor unethical business practices by companies like Enron, which has affected many stakeholders. Poor unethical practices affect the society in many ways; employees lose their job, investors lose their money, and the country’s economy gets affected. This leads to people start losing confidence in the economy and the organizations that are being run by the so-called “educated” top executives that had one goal in their minds, personal gain. When Enron entered the scene in the mid-1980s, it was little more than a stodgy energy distribution system. Ten years later, it was a multi-billion dollar corporation, considered the poster child of the “new economy” for its willingness to use technology and the Internet in managing energy. Fifteen years later, the company is filing for bankruptcy on the heels of a massive financial collapse, likely the largest in corporate America’s history. As this paper is being written, the scope of Enron collapse is still being researched, poked and prodded. It will take years to determine what, exactly; the impact of the demise of this energy giant will be both on the industry and the

    Read More

  • Enron Case

    851 Words  | 2 Pages

    At Novermeber 8th, 2001. Enron was forced to admit made false accounts and false number. Since 1997 Enron inflate profits totaling nearly $600 million. Along with in-depth investigation, these companies who have close partnership with Enron are also found out. These parterships are mostly controlled by Enron senior officials. Enron’s huge foreign loans are often inducled in these companies, and not appear on Enron’s balance sheet. Thus up to $13 billion Enron’s huge debt for investors would not know. Otherwise, Enron;s senior management for the company;s problems are well understand, but no one speak out. On the other hand, many of the board price will continue to rise and sell share in secret. The more irnoic thing is “ Fortune Magazine named Enron as ‘America;s Most Innovative Company’ for six years in a row perior to the scandal.

    Read More

  • Enron's Fall: An Examination of Corporate Ethics

    877 Words  | 2 Pages

    The Enron Corporation was committed to pushing the legal limit as far as possible. Many individuals only seeking to promote their own well-being over any legal or ethical boundaries did this. This was not only isolated with the Enron Corporation, as Arthur Andersen the outside accounting firm and Vinson & Elkins Enron’s law firm were also participants. The key players that led to the collapse of Enron was the founder Kenneth Lay, his successor

    Read More

  • A Corporate Code of Ethics is Not Enough

    2353 Words  | 5 Pages

    Investors and the media once considered Enron to be the company of the future. The company had detailed code of ethics and powerful front men like Kenneth Lay, who is the son of a Baptist minister and whose own son was studying to enter the ministry (Flynt 1). Unfortunately the Enron board waived the company’s own ethic code requirements to allow the company’s Chief Financial Officer to serve as a general partner for the partnership that Enron was using as a conduit for much of its business. They also allowed discrepancies of millions of dollars. It was not until whistleblower Sherron S. Watkins stepped forward that the deceit began to unravel. Enron finally declared bankruptcy on December 2, 2001, leaving employees with out jobs or money.

    Read More

  • The Corporate Culture In Enron's Case

    436 Words  | 1 Pages

    The CFO, Andrew Fastow, systematically falsified there earnings by moving company losses off book and only reporting earnings, which led to Enron’s bankruptcy. Any safeguards or mechanisms that were in place to catch unethical behavior were thrown out the window when the corporate culture became a situation where every person was looking out for their own best interests. There were a select few employees that tried to get in front of the unethical accounting practices, but they were pushed aside and silenced. The corporate culture at Enron became a place where if an employee would not make unethical decisions then they would be terminated and the next person that would make those unethical decisions would replace them. Enron executives had no conscience or they would have cared for the people they ended up hurting. At one time, Enron probably was a growing company that had potential to make a difference, but because their lack of social responsibility and their excessive greed the company became known for the negative affects it had on society rather than the potential positive ones it could have had. Enron’s coercive power created fear amongst the employees, which created a corporate culture that drove everyone to make unethical decisions and eventually led to the downfall and bankruptcy of

    Read More

  • Enron Corporation: The Downfall Of Ethical Behavior In Business

    784 Words  | 2 Pages

    Ethics policies are implemented in almost all businesses. Companies search for candidates that will be moral in their actions so they can ensure long-term financial success. Throughout history we have seen businesses fall due to unethical behavior. In recent years the business Enron Corporation is best known for the scandal that led to the bankruptcy of a company with more than 60 billion dollars in assets. We will examine the circumstances that led to the downfall of Enron, how the scandal was realized, as well as the outcome of one of the largest bankruptcies in American history; a case that exemplifies unethical professional behavior.

    Read More

  • Enron: The Smartest Guys in the Room

    1884 Words  | 4 Pages

    The three main crooks Chairman Ken Lay, CEO Jeff Skilling, and CFO Andrew Fastow, are as off the rack as they come. Fastow was skimming from Enron by ripping off the con artists who showed him how to steal, by hiding Enron debt in dummy corporations, and getting rich off of it. Opportunity theory is ever present because since this scam was done once without penalty, it was done plenty of more times with ease. Skilling however, was the typical amoral nerd, with delusions of grandeur, who wanted to mess around with others because he was ridiculed as a kid, implementing an absurd rank and yank policy that led to employees grading each other, with the lowest graded people being fired. Structural humiliation played a direct role in shaping Skilling's thoughts and future actions. This did not mean the worst employees were fired, only the least popular, or those who were not afraid to tell the truth. Thus, the corrupt culture of Enron was born. At one point, in an inter...

    Read More

  • Remembering the Frauds at Enron and WorldCom

    2739 Words  | 6 Pages

    "This is why the market keeps going down every day - investors don't know who to trust," said Brett Trueman, an accounting professor from the University of California-Berkeley's Haas School of Business. As these things come out, it just continues to build up"(CBS MarketWatch, Hancock). The memories of the Frauds at Enron and WorldCom still haunt many investors. There have been many accounting scandals in the United States history. The Enron and the WorldCom accounting fraud affected thousands of people and it caused many changes in the rules and regulation of the corporate world. There are many similarities and differences between the two scandals and many rules and regulations have been created in order to prevent frauds like these. Enron Scandal occurred before WorldCom and despite the devastating affect of the Enron Scandal, new rules and regulations were not created in time to prevent the WorldCom Scandal. Accounting scandals like these has changed the corporate world in many ways and people are more cautious about investing because their faith had been shaken by the devastating effects of these scandals. People lost everything they had and all their life-savings. When looking at the accounting scandals in depth, it is unbelievable how much to the extent the accounting standards were broken.

    Read More

  • Enron

    1167 Words  | 3 Pages

    Enron started about 18 years ago in July of 1985. Huston Natural Gas merged with InterNorth, a natural gas company. After their merge they decided to come up with a new name, Enron. Enron grew in that 18-year span to be one of America's largest companies. A man named Kenneth Lay who was an energy economist became the CEO of Enron. He was an optimistic man and was very eager to do things a new way. He built Enron into an enormous corporation and in just 9 years Enron became the largest marketer of electricity in the United States. Just 6 years after that, in the summer of 2000 the stock was at a tremendous all time high and sold for more than 80 dollars a share. Enron was doing great and everything you could see was perfect, but that was the problem, it was what you couldn't see that was about to get Enron to the record books.

    Read More

  • Analysis Of Enron, Ethics And Organizational Culture

    1213 Words  | 3 Pages

    Enron Corporation was based in Houston, Texas and participated in the wholesale exchange of American energy and commodities (ex. electricity and natural gas). Enron found itself in the middle of a very public accounting fraud scandal in the early 2000s. The corruption of Enron’s CFO and top executives bring to question their ethics and ethical culture of the company. Additionally, examining Enron ethics, their organization culture, will help to determine how their criminal acts could have been prevented.

    Read More

  • Analysis of the Enron/Arthur Anderson Scandal

    1550 Words  | 4 Pages

    Unethical accounting practices involving Enron date back to 1987. Enron’s use of creative accounting involved moving profits from one period to another to manipulate earnings. Anderson, Enron’s auditor, investigated and reported these unusual transactions to Enron’s audit committee, but failed to discuss the illegality of the acts (Girioux, 2008). Enron decided the act was immaterial and Anderson went along with their decision. At this point, the auditor’s should have reevaluated their risk assessment of Enron’s internal controls in light of how this matter was handled and the risks Enron was willing to take The history of unethical accounting practic...

    Read More

  • Enron Ethical Dilemmas

    722 Words  | 2 Pages

    Enron has risen to the top by engaging in energy projects worldwide and speculating in oil and gas futures on the world’s commodities markets. They also provided financial support to some presidential candidates and members of the U.S. Congress. However, Enron had a secret. The corporation had created partnerships located in off-shore tax havens. Enron’s stock price fell from $90 to 50 cents a share.

    Read More

  • Essay On The Enron Corporation Scandal

    2377 Words  | 5 Pages

    “When a company called Enron… ascends to the number seven spot on the Fortune 500 and then collapses in weeks into a smoking ruin, its stock worth pennies, its CEO, a confidante of presidents, more or less evaporated, there must be lessons in there somewhere.” - Daniel Henninger.

    Read More

  • What Are The Ethical Issues In Enron

    874 Words  | 2 Pages

    Enron was on the of the most successful and innovative companies throughout the 1990s. In October of 2001, Enron admitted that its income had been vastly overstated; and its equity value was actually a couple of billion dollars less than was stated on its income statement (The Fall of Enron, 2016). Enron was forced to declare bankruptcy on December 2, 2001. The primary reasons behind the scandal at Enron was the negligence of Enron’s auditing group Arthur Andersen who helped the company to continually perpetrate the fraud (The Fall of Enron, 2016). The Enron collapse had a huge effect on present accounting regulations and rules.

    Read More

  • The Enron Corporation Case Study

    1339 Words  | 3 Pages

    The Enron Corporation was an American energy company that provided natural gas, electricity, and communications to its customers both wholesale and retail globally and in the northwestern United States (Ferrell, et al, 2013). Top executives, prestigious law firms, trusted accounting firms, the largest banks in the finance industry, the board of directors, and other high powered people, all played a part in the biggest most popular scandal that shook the faith of the American people in big business and the stock market with the demise of one of the top Fortune 500 companies that made billions of dollars through illegal and unethical gains (Ferrell, et al, 2013). Many shareholders, employees, and investors lost their entire life savings, investments,

    Read More

More about Enron Case Study

Open Document