The Ethics Of The Enron Scandal

The word “fraud” was magnified in the business world around the end of 2001 and the beginning of 2002. No one had seen anything like it. Enron, one of the country’s largest energy companies, went bankrupt and took down with it Arthur Andersen, one of the five largest audit and accounting firms in the world. Enron was followed by other accounting scandals such as WorldCom, Tyco, Freddie Mac, and HealthSouth, yet Enron will always be remembered as one of the worst corporate accounting scandals of all time. Enron’s collapse was brought upon by the greed of its corporate hierarchy and how it preyed upon its faithful stockholders and employees who invested so much of their time and money into the company. Enron seemed to portray that the goal of corporate America was to drive up stock prices and get to the peak of the financial mountain by any means necessary. The “Conspiracy of Fools” is a tale of power, crony capitalism, and company greed that lead Enron down the dark road of corporate America.

Two years after Enron filed for bankruptcy in 2001, Nancy b. Rapoport wrote this essay expressing her unique perspective on the real cause of Enron’s demise. This essay catches the reader’s attention instantly, because unlike abundant other articles written on the biggest corporate scandal in American history, the author here rejects Jeff Skilling’s (former president of Enron) argument1 of what brought about Enron’s downfall. She instead uses another metaphor, arguing that Enron’s downfall was more like Titanic’s-

Beyond the dollars and cents, the Enron catastrophe offers a new textbook example of failed ethics in business. Individuals are responsible for their actions; unethical or illegal individual actions are systems of systemic problems, and Enron’s system of accountability, oversight, ethical disclosure and corporate concerns were flawed. The corporate culture at Enron exemplified values of risk taking, aggressive growth, and entrepreneurial creativity. Although these can be positive values, they were not balanced by genuine attention to corporate integrity and value. Since the culture at Enron was not well

Ethics, as stated by Dawn D. Bennett-Alexander and Linda F. Harrison in The Legal, Ethical & Regulatory Environment of Business in a Diverse Society, are considered subjective laws as well as a how-to-guide for businesses in how they conduct themselves with their suppliers, customers, employees, and anyone else they do business with (2012). It is not enough to know how to run and conduct business, it is also important that good judgment, situational experience and common sense be used in order to be successful and remain that way (Bennett-Alexander & Harrison, 2012). There have been companies in the

With a brief overview of Enron given, the unethical tactics that took place amongst the leadership in Enron is important for discussion. At the head of all the unethical tactics lay Kenneth Lay, CEO of Enron, who is the most recent and visible cases of alleged CEO failure to act accountable and responsible (Ferrell & Ferrell, 2010). According to Ferrell and Ferrell (2010), no other high-ranking executive has had as much of an impact on the scrutiny of business ethics in America than Ken Lay, making Enron the ultimate example of corporate wrongdoing. Of the employees involved, there were 22 that were indicted or convicted; to show how deep the wrongdoings went, there were 130 unindicted co-conspirators that worked for Ken Lay (Ferrell & Ferrell, 2010). This goes to show the influence, though negative, he had down the line. Culture plays a big part in organizations, and ethical rule bending was a part of the midlevel management corporate culture at Enron (Ferrell & Ferrell, 2010). Enron has been described as having a culture of arrogance,

The Enron Jeffrey Skilling and Ken Lay knew was one they kept to themselves and a few chosen colleagues. The rest of the world saw a global oil company on the cutting edge of its business and paving a path that other American firms could follow. In its trail, investors were getting rich, employees found reward and satisfaction, and the community it called home thought it to be a model citizen and stalwart of its corporate skyline. But the truth was that the Enron Skilling and Lay knew was a fragile combination of slippery investments, shoddy book keeping, disrespect for the law, a lack of personal integrity and accountability, false communications to the public, and poor ethical management. All this was concealed by a leadership culture that seemed to believe they were either too smart to get caught or too important to be questioned. Enron and its executives paved a path that took them from a small oil company to a global leader to bankruptcy court and now many of its former executives sit in federal prison cells 13 years after the company’s tumultuous downfall. The lessons of the self-inflicted largesse from Enron are many but the one that glares from its core is that honesty and integrity need to hold a firm place at the center of a company’s business philosophies or it may quickly find a rocky path to its own end.

Enron was the largest company for energy and natural gas made possible through the merging of Houston Natural Gas and InterNorth based in Omaha. The merger made Enron the largest energy trader in the country and the seventh largest in the world. The company advanced into new fields of business by launching a broadband service unit and Enron online, where people can go to trade commodities. Enron rose quickly to become one of America’s most valuable company. It had a peak of $100 billion in revenue and it was taking the market by storm. The company had many major projects and had plans to expand into foreign countries. With the much celebrated success, Enron would have a greater fall than its rise because of mismanagement and poor accounting practices. The company was known for hiring the smartest individuals in the country, but that did not prevent the company from its embarrassing collapse. Enron collapsed with millions of dollars of pension funds and about 5600 people were unemployed. The company that was thought to be performing in the eyes of the public was actually in deep trouble behind the curtains. The big question many people ask is what caused Enron’s collapse? The truth of the matter is that, Enron’s collapse was not caused by just one thing, it was caused by many things such as theft, lies, poor accounting practices, lack of auditing, political factors, and conspiracy. This is what Enron represented about a decade after the merger, this is how the company became

Enron was once one of the largest companies in the world. After many years of using diverse accounting tricks, they finally had to file bankruptcy in December 2001 due to not being able to hide billions in debt. The top 140 executives got paid 680 million in 2001. (CNN Library, 2015). Kenneth Lay as the founder of Enron and Jeffrey Skilling as the chief executive were both convicted in 2006. (Weiss, 2009, p.28). Thousands of workers were left with valueless stock in their pensions which literally means they lost their life savings. This article focuses on Enron’s ethics code, Enron’s failure of top leadership, Enron’s corporate culture and Enron’s complicity. On the other hand, I will discuss the lessons I learnt from Enron case.

The following paper will explain the reason of why Enron as a company failed. It will compare and contrast the contributions of leadership, management and organizational structures to the failure.

Accounting is a necessary and vital part of maintaining any business, it is needed to file taxes, know how much one has in assets and liabilities, and indicate to investors whether the company would be a profitable undertaking. However, sometimes the accounting goes horribly wrong when people, even those who seem to be moral and uncorrubtable, fudge the numbers. By inflating books, they can get away with billions of dollars in fraud and make nice bonuses for themselves. However, these acts of greed affect not only the fraudulent person, but their families, coworkers, and other businesses. There are several ways massive accounting fraud has taken place in companies, from increasing depreciation, to not reporting debt, to right-out making up numbers to report. These frauds have been detected in multiple ways as well whistleblowers, internal audits, and even the fraudulent people themselves. The effect of these scandals have taken a heavy toll on businesses financially and on people involved emotionally.

Enron was once one of the largest companies in the world. After many years of using diverse accounting tricks, they finally had to file bankruptcy in December 2001 due to not being able to hide billions in debt. The top 140 executives got paid 680 million in 2001. (CNN Library, 2015). Kenneth Lay as the founder of Enron and Jeffrey Skilling as the chief executive were both convicted in 2006. (Weiss, 2009, p.28). Thousands of workers were left with valueless stock in their pensions which literally means they lost their life savings. This article focuses on Enron’s ethics code, Enron’s failure of top leadership, Enron’s corporate culture and Enron’s complicity. On the other hand, I will discuss the lessons I learnt from Enron case.

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

The reprehensible story of the Enron Corporation’s rapid rise to success followed by their consequential disgraceful fall is one that has captivated the attention of the public for more than a decade. Not only was this scandal highlighted largely due to the widespread publication of the Enron Corp’s actions in the newspapers and television but must notably their substantial contradictory actions against not only basic ethics but Enron’s published Code of Ethics. Outlining the reputation of Enron, Kenneth Lay, Chairman and Chief Executive Officer (CEO), in a foreword within Enron’s Code of Ethics stated, “to be proud of Enron and know that it enjoys a reputation for fairness and honesty and that it is respected.” Even though Kenneth Lay spoke to the company as a whole on manners in ethics and good conduct, it was he and a number of other high placed executives who choose to ignore their own statements and act in complete disregard. When running an organization executives are held responsible and expected to maximize their shareholders interests and enhance overall capital gain while upholding to the practice of ethical processes and abiding by common governing virtues. Through the study of three key virtues (integrity, fairness, and justice) and applying them to the Enron case, it will quickly be seen how evident the leaders of this organization choose to neglect ethical practices and virtues to gain personal financial growth.

Frauds and financial scandals in the business world were before an Enron’s case and will be after it. That’s in human nature. But a chain of events lead to an enormous shock on the Wall Street and went down in history as one of the biggest business scandals. For a long time sequence of events was a basis for articles and books, documental films and analytic researches. Specialties were retold and discussed by analytics. It was real human tragedy.

Some teenagers today, may not know what business ethics are. Well, business ethics is the difference between right and wrong in the business realm. There are so many companies with good business ethics but in our world we only hear about the companies with the bad ethics. One of those companies is called Enron. Enron is a gigantic corporation that deals with the electrical power in Dallas, Texas. Enron may have destroyed many people’s lives due to the company declaring bankruptcy. Enron’s collapse has devastated the world; especially the market place because no one thought that a corporation that big would ever fall. What the Enron executives did was morally despicable, lying to their fellow “blue collar” workers and not telling them the truth behind all of Enron’s debts. “In the space of five days last week, the story of Enron’s collapse went from the merely unusual to the truly baroque, with plot elements lifted from the pages of Robert Penn Warren and John Grisham” (Time Feb 2002 18). Enron executives have brought loads of controversy upon themselves. How does the seventh wealthiest corporation collapse? Why did it collapse? Who was behind all of this? Questions like these are wandering through investor’s heads who invested their money in this company.