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Ethical issues in enron
Ethical issues in enron
Ethical issues in enron
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Enron was an energy company founded in 1985 that was in the business of “trading commodities, which soon became the largest business site in the world” (Cbc.ca, 2006). By the end of 2001 it was discovered that Enron had created a “complex web of partnerships” (Cbc.ca, 2006) to hide the level of its level of debt and to artificially inflate stock prices. This financial fraud played out in a company whose “ethics code was based on respect, integrity, communication, and excellence (Cengage.com, n.d.). It is evident that these values were a superficial layer of outward facing trust that masked the problems inherent in the company where the espoused values are not the enacted values (Lecture Slides: Slippery Slopes). These problems are “rooted in …show more content…
These problems and the company’s failure to address them led to the creation of an unethical work environment that further exacerbated the extent of the financial fraud. 2.0 PROBLEM SYMPTOMS The problems surrounding the level of power and deregulation of executives, the unethical nature of the company culture, and the availability of complicit partners were manifested throughout every level of the company in the form of unethical behaviour and can be described as symptoms of these greater issues. The waiving of and lack of internal controls designed to prevent fraudulent behaviour in companies was a reality at Enron. This allowed and provided ample opportunity for the executives of the company to engage in unethical behaviour. For example, one …show more content…
The culture promoted by Enron was one of intense competition and achievement that fostered unethical behaviour for fear of losing one’s job or of company failure. Individuals were urged to “make the numbers…[and] if you steal, if you cheat, just don’t get caught” (Cengae.com, n.d.). This sort of unspoken message would have not only created a widespread participation in unethical behaviour but also downplayed the repercussions of this sort of behaviour as the company itself was promoting it, so the internal consequences would be
Reputation is a company’s biggest asset so you would think that organisations would avoid engaging in any sort of business that would put its reputation in jeopardy. Nevertheless, many organisations find their credibility destroyed due to practices that are harmful and illegal, which could land a CEO’s in prison.
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
In the movie Wall Street, Gordon Gekko stated, “Greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms: greed for life, for money, for love, knowledge, has marked the upward surge of mankind” (Mali, 2013, para. 8). This quote accurately identifies the motivation behind the actions of Bernie Madoff and Enron. Both Madoff and Enron were greedy in conducting business. Both violated corporate ethical issues as they acted fraudulently to steal money from clients and shareholders. Bernie Madoff was a once famous stockbroker, investment advisor, and financier prior to committing fraud and running the largest financial scheme in American history. He gained people’s trust by his reputation and the contents of his resume. Ultimately, his Ponzi scheme scammed hundreds and thousands of dollars out of the pockets of his clients. Enron, a natural gas company, hid a debt of billions from failed projects and deals. The company was able to continue to operate due to loopholes and poor financial reporting. Both of these cases are examples of ethical irresponsibility. They are prime examples of why having a code of ethics is just not enough. Companies must create a culture that instills a strong sense of ethics and integrity and eliminates anyone who threatens or violates this established culture.
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.
I believe that Enron’s top executives, mainly Lay and Skilling, are mainly to blame for the Enron collapse. Lay and Skilling were surely able to lead an effective and efficient company, but they lacked self- control and let their greed get the best of them. They encouraged a competitive environment that, a survival of the fittest mentality, causing employees to constantly worried about their j...
I certainly agree to the author and McNerney that the unethical dysfunctional company norm is the root cause of the ethical issue. It is this norm created by the predecessors who never set good ethical examples that influences the employees. They believed the politically safest way of executing tasks would be mimicking how their superiors get their jobs done.
the social world of Enron. The fact that they took the form they did and to such a pronounced degree are certainly troubling and perhaps surprising. What should not be surprising is the role such ritualization processes played in the development of this type of deviance, given recognition of their importance in social relationships and organizations.
Sherron Watkins was the person who reported Enron and their top executives. Enron notoriously had a culture of haughtiness and untouchable attitudes. Jeff Skilling set the culture in the corporation encouraging his employees do push the limit, be aggressive, innovative, and make new rules and finally making new laws. Furthermore, a culture led by example was to be always breaking the rules. All those words can have multiple meanings. One could read between those lines. Obviously those terms and the culture that had been established were doings illegal acts. Enron also had a list of codes that were not followed. The company like most had a compliance officer. However, Pre Enron the compliance department had a lot of short falls. Today’s Compliance department in general is more concise and more
This paper will analyze Enron’s Code of Ethics and examine the sections on values and corporate responsibility. The paper will use applicable theories and concepts and will detail Ken Lay’s view of ethics and Enron’s corporate social performance. The paper will argue that Enron was not being socially responsible to all of its stakeholders because it deceived employees and investors about its real financial status despite having stated in its company code of ethics that transparency, integrity, and respect for the law would be the cornerstones of its daily operations.
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.
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...
When an ethical dilemma arises within an organization, it is difficult to separate right and wrong with what is best for the majority. Sometimes the answer is not a simple “yes” or “no.” In 2002, Enron Corporation shows us just that. By 2002, the sixth-largest corporation in America filed for Chapter 11 bankruptcy. The case of the Enron scandal is one of the best examples of corporate greed and fraud in America.
“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.
The main ethical issue with the Enron scandal is that Enron allowed legal loopholes to supersede ethical principles (Bowen & Heath, 2005). Enron used legal principles to justify what they were doing instead of acknowledging that the accounting processes they were using were unethical. Another one of the ethical issues is that Enron faced was that
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,