Business Research Ethics Essay

Between the years 2000 and 2002 there were over a dozen corporate scandals involving unethical corporate governance practices. The allegations ranged from faulty revenue reporting and falsifying financial records, to the shredding and destruction of financial documents (Patsuris, 2002). Most notably, are the cases involving Enron and Arthur Andersen. The allegations of the Enron scandal went public in October 2001. They included, hiding debt and boosting profits to the tune of more than one billion dollars. They were also accused of bribing foreign governments to win contacts and manipulating both the California and Texas power markets (Patsuris, 2002). Following these allegations, Arthur Andersen was investigated for, allegedly,

As with much of Enron, their outward appearance did not match what was really going on inside the company. Enron ended up cultivating their own demise for bankruptcy by how they ran their company. This corrupt corporate culture was a place whose employees threw ethical responsibility to the wind if it meant financial gain. At Enron, the employees were motivated by a very “cut-throat” culture. If an employee didn’t perform well enough, they would simply be replaced by someone who could. “The company’s culture had profound effects on the ethics of its employees” (Sims, pg.243). Like a parent to their children, when the executives of a company pursue unethical financial means, it sets a certain tone for their employees and even the market of the company. As mentioned before, Enron had a very “cut-throat” attitude in regards to their employees. This also became one Enron’s main ethical falling points. According to the class text, “employees were rated every six months, with those ranked in the bottom 20 percent forced to leave” (Ferrell, 2017, pg. 287). This system which pits employees against each other rather than having them work together will create a workplace of dishonesty and a recipe of disaster for the company. This coupled with the objective of financial growth, creates a very dim opportunity for any ethical culture. “The entire cultural framework of Enron not only allowed unethical behavior to flourish,

Enron’s demise was led by the arrogance and greed of senior executives. The belief was they had to be the best business leaders in the United States. Many also believe that there was a conflict of interest with the auditing firm because not only did they serve as the auditing firm, they also served as a consulting firm to Enron. This enabled them to fabricate financial statements by building assets and hiding debt from investors. The loss of the recorded $1.2 billion shareholders equity meant that many victims of this fraud lost their jobs and their retirement funds.

The agencies not only discovered the complex web of fictitious partnerships that hid Enron’s massive debt but also that the company’s external accounting firm, Arthur Anderson, was creating materially false and misleading audit reports. . The true nature of Enron’s massive financial losses was shown to the public and the stock price plunged, causing investors to lose billions of dollars. Enron, however, was just the first and largest scandal to become public. Numerous companies including Tyco, WorldCom, and Kmart were found to have inflated earnings (Martin & Combs, 2010, 103). Investors had been manipulated to invest into companies that followed unethical business practice thereby shattering future investor confidence.

According to the documentation, those Enron people who faced ethical issues used different prescriptive reasoning approach to resolve their dilemma. Take Andrew Fastow as an example, he might not start all the fraudulent financial activities in the first place; however, he decided to do so in order to please the boss, when Ken Lay wanted to see neat financial disclosures. It seemed that Fastow

In much of the business world from the past to today, we constantly are exposed to unethical behaviors and situations of conflict within the work environment. Thinking critically about a particular dilemma and whether or not it is ethically wrong takes time and critical thinking. The accountants of Enron could have avoided this situation by stepping in and explaining to their superiors the cost of the long-term consequences compared to the short-term benefits was not worth what they were putting out on the line. By analyzing the Enron scandal there will be a greater ability to know information that will help pin point any unethical behavior that an accountants may experience in their own work life. Justin Schultz, a corporate psychologist

Enron was a U.S. based energy-trading company. At its height of operation in the early part of 2001, it was booking revenues of about $140 billion (Enron Ethics). At the end of 2001 it declared bankruptcy. The Enron bankruptcy was the largest corporate economic failure at that time, and still remains an example of how corrupt practices magnify in the long run. What led to Enron’s failure was primarily a lack of ethics, and poor accounting practices. This scandal was one of the reasons that new regulations were passed for financial reporting standards, the Sarbanes-Oxley Act was passed in 2002 as a means of stopping such a collapse in the future.

Now, let’s switch to negative part of the Enron and see what led this company to ethical violations. Because of an increased tough competition Enron started using international investments and diversification in order to keep its position. Some faulty decisions in management

Enron failed all governance system practices. They reported improper equity shares; they did not abide by the GAAP. Enron was a victim of profit and revenue at no cost. The Enron executives accounting staff, accounting firm and law firm made erroneous decisions just to keep their revenue incoming. They reported false financial reporting continuously, stockholders had great losses, employee retirement fund was depleted and they did not honor their code of ethics.

There was a vast number of ethical issues raised in the movie “Enron-the Smartest Guys in the Room” but the four I am going to focus on are listed below. Art Anderson, Ken Lay and all of the other executives did a number of unethical things which ultimately brought down Enron and affected thousands of employees and their futures. The bottom line was that each and every one of them acted out of greed for the almighty dollar.

(Lindstrom) Hopefully the congressional meetings and hearings will cause other potential "Enron/Arthur Anderson-followers" to choose the legal path of doing business. Observers believe that it was not so much that the executives opted to mishandle their company, but that the scandal went without notice for so long by those people and groups which are set in place to detect and prevent dealings such as this. Auditors, internal/external controls, government regulators, accountants, etc., all failed to recognize the deception.

While the majority of people in the US are aware of the problems that were faced by Enron, most do not realize the impact the company had on other organizations which were also involved in the scandal. One such company was the accounting firm Arthur Andersen. While the firm is still technically in business, it is nothing like it was in the days before its ethical dilemma and scandal. The mission and core values that were touted by Arthur Andersen were violated by the problems in which the company involved itself. Public embarrassment was definitely caused by that, but there was much more than embarrassment at stake for the firm. Before the problems Arthur Andersen had 28,000 employees in the US and 85,000 worldwide (Moore & Crampton, 2000). As of 2011, the company had only 200 employees, and most of them were based in and around the Chicago area. These employees are working on the dissolution of the company and the handling of more than 100 civil lawsuits which are still pending against the company from its part in the debacle that took down Enron.

Business Industry has witnessed the outcomes of bad moral decisions taken by business leaders. Enron’s story is only one example of corporate scandals and cases of bad moral decisions, which has not only shaken the public trust in corporations, but also affected the bank accounts of investors and employees. Before the bankruptcy of Enron; it was included in one of the fortune 500 companies after its fraudulent accounting case the share went down to $1 (Enron scandal, 2010; PBS, 2002; Godwin, 2006; Godwin, 2008).

Unfortunately, scandals like Enron are not isolated incidents and the last decade has offered Americans a disheartening perspective with comparable scandals like that of WorldCom and Tyco, Sunbeam, Global Crossing and many more. Companies have a concrete responsibility not just to their investors but to society as a whole to have practices which deter corporate greed and looting and which actively and effectively work to prevent such things from happening. This

To make matters worse, when Andersen found problems in the financial statements, they didn’t make corrections due to a conflict of interest. The concern was that if Andersen brought these problems to light, Enron would walk away and cost Andersen millions of dollars in the long run. Andersen contemplated dropping Enron as a client, but did not follow through with it. Because the audit and consulting was done at the same firm, it clouded Andersen’s judgment. Andersen employees in Houston began shredding documents and therefore brought obstruction of justice charges that destroyed the firm.