The Ethics Of Enron Oxley Act

1309 Words6 Pages
The Houston based corporation of Enron was once considered a top company, until its demise from a complex accounting scheme. The company that was forced to declare bankruptcy and lay off many employees; also resulted in thousands of others losing a significant portion of their retirement funds that were invested in the company’s stock (Ferrell, Fraedrich, & Ferrell, 2013). Additionally, the perceived scandal propagated concern of accounting practices of corporations and initiated new reporting practices like the Sarbanes-Oxley Act. Enron was created from the joining of gas pipeline companies in 1985 and was responsible for natural gas, electricity, and communication products and services (Ferrell, et al, p.318). During the 1990’s,…show more content…
The culture also focused on making money for executives more than profits for shareholders (Ferrell, et al, p.321). The compensation package stimulated risky decisions, possibly breaking rules in an effort to increase financial results. Employees were rated bi-annually, a system designed by Skilling, and the lower percentile were removed from payroll resulting in fierce competition (Ferrell, et al, p.321). Unfavorable news could result in dismissal, thus issues were suppressed. Lay believed the ability of employees to reach full potential contributed to the company success. He also indicated his value in a “highly moral and ethical culture” and attempted to ensure this was realized within Enron (Ferrell, et al, p.321). While the indictment eluded that Lay had lied about finances, he persisted that he handled any identified items. This also raises concern about how much a CEO actually knows about misconduct in the business. The aggressive nature exhibited by Enron employees led to rules violations, many of which were approved through the proper channels. The complex format of checks and balances remove the possibility that the fall of Enron was the responsibility of a single individual. It was a combination of aggressive and questionable practices along with the failure of others to identify wrongdoings. The use of special-purpose entities (SPEs) contributed to filing of bankruptcy by Enron, the largest in corporate
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