Managerial Ethics: Enron Case Study

The Enron Corporation was an energy trading and utilities company that eventually failed due to the discovery that Enron was hiding large debts and losses in financial documents.

More than a decade ago, one of the most commanding corporations in modern American history filed for bankruptcy. Enron, a seemingly invulnerable company would eventually provoke sweeping changes in regulation that controls the management and accounting of public companies even to this day. The Enron scandal has come to be known as one of the prime audit failures of all time and serves as a classic example of corporate greed and corruption. However, for the generation that watched in horror as corporations such as Enron fell along with the stock market, this scandal is slowly becoming just that: history. And for the newer generation of college students like me, it is almost ancient history. Despite the time that separates us from this scandal, it has never been more important to remember the lessons learned and best understand how the adoption of The Clarkson Principles can guide our careers in the business sector.

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,

According to Johnson (2012) leaders are powerful role models, and policies will have a little effect if leaders do not follow the rules they set. In Enron case, corruption and ethical misconduct were deeply embedded in their business culture where profitability was more important than ethics. In this paper, I will address the factors that had led to the development of the culture of profit before principle at Enron. Also, I will create my personal code of ethics that will guide me in my professional and personal decision making and doing the right thing when faced with ethical challenges.

Ethical behavior is behavior that a person considers to be appropriate. A person’s moral principals are shaped from birth, and developed overtime throughout the person’s life. There are many factors that can influence what a person believes whats is right, or what is wrong. Some factors are a person’s family, religious beliefs, culture, and experiences. In business it is of great importance for an employee to understand how to act ethically to prevent a company from being sued, and receiving criticism from the public while bringing in profits for the company. (Mallor, Barnes, Bowers, & Langvardt, 2010) Business ethics is when ethical behavior is applied in an business environment, or by a business. There are many

Enron’s ride is quite a phenomenon: from a regional gas pipeline trader to the largest energy trader in the world, and then back down the hill into bankruptcy and disgrace. As a matter of fact, it took Enron 16 years to go from about $10 billion of assets to $65 billion of assets, and 24 days to go bankruptcy. Enron is also one of the most celebrated business ethics cases in the century. There are so many things that went wrong within the organization, from all personal (prescriptive and psychological approaches), managerial (group norms, reward system, etc.), and organizational (world-class culture) perspectives. This paper will focus on the business ethics issues at Enron that were raised from the documentation Enron: The Smartest Guys

Q1: Analyse the corporate culture at Enron and its management’s behaviour. Include in your analysis, the normative theory of ethics which you would consider most relevant in driving the decision making at Enron.

Ethical issues have greatly transformed in our lives since the great Enron, Xerox and other huge corporations proposed big profits showing earnings of billions of dollars and yet in reality facing bankruptcy. These corporations faced great trouble with the federals and state for manipulating financial statements. But not only corporations can be blamed on this, accounting firms were involved in this as much as the corporations were. With the business stand point, ethics comprises of principles and standards that guide behavior. Investors, traders, customers, and legal system determine whether a specific action is ethical or unethical. Ethical issue is a vast subject, but we will look at the niche

Q 1: Evaluate Enron profit and cash flow performance during the period 1998 – 2000?

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

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.

It seems like business morals and ethics are being whisked to the side in lieu of the ever growing demand of higher stock prices, rising budget goals and investor profits. Despite the increased regulation of corporations through legislation, such as, Sarbanes-Oxley, some corporations still find themselves struggling to maintain ethics and codes of conduct within the workplace. In reviewing the failings of the Enron Scandal, one can heed the mistakes that both individual and organization malaise, such as, conflicts of interest, lack of true transparency and the sever lack of moral courage from the government, executive board, senior management and others, contributed to the energy giant’s downfall.

Ethics is something that is very important to have especially in the business world. Ethics is the unwritten laws or rules defined by human nature; ethics is something people encounter as a child learning the differences between right and wrong. In 2001, Enron was the fifth largest company on the Fortune 500. Enron was also the market leader in energy production, distribution, and trading. However, Enron's unethical accounting practices have left the company in joint chapter 11 bankruptcy. This bankruptcy has caused many problems among many individuals. Enron's employees and retirees are suffering because of the bankruptcy. Wall Street and investors have taken a major downturn do to the company's unethical practices. Enron's competitors

The collapse of Enron and all of the questions that arise to try and explain how this company failed, it all comes back to the values of management. The last option on our training plan will provide training in ethics. Enron executives and employees were caught in the desire to report ever-increasing earnings in order to keep stock prices rising, and to protect their jobs and wealth in their retirement plans (,2002).

Enron's entire scandal was based on a foundation of lies characterized by the most brazen and most unethical accounting and business practices that will forever have a place in the hall of scandals that have shamed American history. To the outside, Enron looked like a well run, innovative company. This was largely a result of self-created businesses or ventures that were made "off the balance sheet." These side businesses would sell stock, reporting profits, but not reporting losses. "Treating these businesses "off the balance sheet" meant that Enron pretended that these businesses were autonomous, separate firms. But, if the new business made money, Enron would report it as income. If the new business lost money or borrowed money, the losses and debt were not reported by Enron" (mgmtguru.com). As the Management Guru website explains, these tactics were alls designed to make Enron look like a more profitable company and to give it a higher stock price.