EXECUTIVE SUMMARY
Enron scandal spiralled out of controlled by actions perpetuated by the indirect knowledge or direct actions of Lay, Jeffrey Skilling, Andrew Fastow, and other executives. Also, the inability for this action to be detected by gatekeepers, which includes Auditors, Credit rating companies, Financial Analysts, can also be attributed to their collapse. Also, the involvement of banks and the press who awarded numerous awards amongst which is most innovative company and described them a “new business model”. Further, Enron six million dollars contribution to Federal politician candidates and parties cannot be ignored in this scandal. Although no concrete prove can be attested to bribery, it is my opinion that politician had a
Q 1: Evaluate Enron profit and cash flow performance during the period 1998 – 2000?
Enron is viewed by many as the quintessential corrupt corporate juggernaut. Corporations are nothing more than a collection of people. If a corporation is corrupt than it must be filled with corrupt employs, and led by a front office devoid of moral standards, right? Perhaps this is not entirely true. Certainly an element of corruption was present in the case of Enron, the number of corrupt employees may not have been as encompassing as presumed. When asked to rate their level of honesty, most would respond that they are honest. In actuality, most people are not completely honest, and their level of dishonesty is correlated with their ability to rationalize the dishonesty and preserve their self- image as an honest and admirable person
In the case of Enron’s collapse, many would blame the external auditor’s collusion with the management, the aggressive accounting policy it had adopted to manipulate its earnings or the Special Purpose Entity (SPE) it had created as a sham to conceal its debts. However, everything began from an internal environment with weak controls.
Question 1 Summarize 1 one page how you would explain Enron’s ethical meltdown: Enron was an energy company founded by Kenneth Lay in 1985 through a merger of vast networks of natural gas lines. Enron specialized in wholesale, natural gas, and electricity, and made its money as a wholesaler between suppliers and customers rather than actually owning any. Enron in fact didn’t own any assets, which made their accounting procedures very unusual. The lack of accounting transparency at Enron allowed the company’s managers to make Enron’s financial performance better than it actually was. The organizational culture at Enron was to blame for it’s ethical meltdown. Enron’s accounting scheme slowly began to erode its ethical practices, which soon led the culture of Enron to become a more aggressive and misleading business practice. Enron reported profits from joint partnerships that were not yet attained in order to keep stock prices up (or make wall street happy). As this was happening employees began to notice the ethics in senior management (leadership) deteriorating, and soon after they to would follow in their footsteps. Senior management thought they were saving their company from financial ruin and though lying was ok if it meant saving the company. Investors would surely sell their stocks if they really knew the situation the
The United States that have been considered as a super power country and also the direction of science disciplines including accounting must felt bitterness. Business scandals that happened seemed eliminate confidence by the business world about the practice of good corporate governance in the United States.
The use of insider information is illegal in the United States. Insider information is stock related information that can be obtained many ways to gain large, abnormal gains in the stock market. A popular way to gather inside information is from direct employees of the company. Information on stocks can either be illegal or legal. If the information is publicized for all current or future investors to use, then it isn't illegal. Illegal information becomes unlawful when it becomes privatized from the public, and to be only used by investors in the stock market. The action of using insider information isn’t considered illegal until the information is used in a stock market located in the United States, most commonly the New York Stock
Please read the Enron cases posted on blackboard and the one in your book then answer the following questions based upon the case and Chapter 9. Make sure that your answers are supported by the facts of the case and the concepts you learned from Chapter 5. Please rely only on the case/chapter 9 to answer the questions except for question # 12—requires outside search.
In light of the recent scandals that rose around big multinationals such as Enron and WorldCom, it has become evident that reform in the traditional corporate operations and objectives was to be encompassed in the organisations corporate strategies. Indeed throughout the years, companies main objectives were defined primarily as being economic objectives, Multinationals developed with sight of profit maximisations regardless to the other incentives, Friedman considered that to be the foundation for a well-managed company, it was further considered that the financing of any other sort of social corporate activities rather unnecessary. The expenses were regarded as expenditures for the owners and investors; this was a time where shareholders rights were regarded as conflicting with other constituents namely the employees, creditors, customers or the community in general. However this interpretation is seen as rather inadequate due to the nature of the amalgamated relation between both constituents. Stakeholders in modern corporate doctrine are considered as a core apparatus for the well functioning of a business. It is however often argued that the only way for a corporation to achieve better results and maximise its profits is to include other people in the process, individuals or organisations with direct or indirect interest in the well performance of the company, that is the reason why modern regulations and codes include a number of stakeholders other than the
Ethics in the business world can often times become a second priority behind the gaining of profits and success as a company. This is the controversial issue that led to the Enron scandal and ultimately the fall of this company. Enron Corporation was an energy company, and in the peaks of their success, they were the top supplier of natural gas and electricity throughout America. Enron Corporation came about from a merger between Houston Natural Gas and InterNorth. Houston Natural Gas was a gas providing company formed in Houston during the 1920’s. InterNorth was a company formed in Nebraska during the 1930’s and owned one of America’s largest pipeline networks. In 1985, Sam Segnar, the CEO of InterNorth bought out Houston Natural Gas for $2.4 billion. A year later in 1986, Segnar retired and was replaced by Kenneth Lay, who renamed the company and created Enron. Enron was the owner of the second largest pipeline in America that measured over 36,000 miles. The company was also the creator of the “Gas Bank”, which was a new way to trade and market natural gas and served as an intermediary between buyers and sellers. As the company continued to develop, it became more of a trader rather than a producer of gas. This trading extended into coal, steel, water and many other areas. One of Enron’s largest successes was their creation of a website called, “Enron Online” in 1999, which quickly became one of the top trading cites in the world. By the year 2000 Enron as a company was
Most of the world has heard of Enron, the American, mega-energy company that “cooked their books” ( ) and cost their investors billions of dollars in lost earnings and retirement funds. While much of the controversy surrounding the Enron scandal focused on the losses of investors, unethical practices of executives and questionable accounting tactics, there were many others within close proximity to the turmoil. It begs the question- who was really at fault and what has been done to prevent it from happening again?
This report will analyse the groupthink’s concerns in the collapse of Enron. The collapse of Enron is less than three months, which Enron from a very prosperous company to a bankrupt enterprise. The collapse of Enron is one of the most grievous business failures in United States. This disastrous business failure had causes a large number of employees lost their jobs and retirement savings. Groupthink leads groups to make faulty judgments.
“Ethics and integrity are at the core of sustainable long term success … Without them, no strategy can work and, as Enron has demonstrated, enterprises will fail. That’s despite having some of the ‘smartest’ guys in the room.” by Richard Rudden. As the quotation states, ethics and integrity play a key role in the success of any corporation; through these principles, companies can ensure their compliance with law, build a strong relation with their stakeholders, and create a positive reputation in the market. However, this was not the case with Enron, America’s energy giant. This company’s mission statement was stated that its performance was
The ENRON Scandal is one of the most well-known financial and ethical crisis within American history. The main reason was the Agency problem as we will illustrate with this paper.
As per various researches, it has been proved that today variety of issues are prevailing in our society and all of them should be properly catered so that no further issues can be raised and this will, in the end, helps in reshaping the entire structure of our society too. Therefore proper measures should be taken from the very start so that no negativity can be raised and this will eventually help in enhancing the efficiency of our society too. The ethical code of conduct is linked directly with the research ethics and this is the major arena that should be highlighted positively in our society in order to enhance potential outcomes. In an organization, it is important to see how work is done by keeping in mind the ethical code of conduct and how it is affecting the society. In the majority of the fields, information security is not directly linked with the security and ethics and this is the reason how it is leading towards various alarming issues too. Therefore it is important to see how to enhance the effectiveness of various products. This paper will focus on ethics and how Eron faced issues due to lack of ethical strategies (Conroy & Emerson 2006).
Before Enron bankruptcy it was one of America’s most powerful and successful energy companies. The company thrived and pushed to be number one no matter the circumstance, in this company’s case if it meant doing it illegally. Fraud accounting, auditing, energy trading, and illegal finance was the company’s downfall leading to corruption and most of all greed. Enron was aggressive and a competitive environment. The documentary was just not giving the name “The Smartest Guys in the Room,” for nothing, being an Enron employee that’s the title everyone held. Enron’s culture was a rapidly changing environment created by the corporate’s leadership and management. When you hold the title of leadership you are responsible for