Enron: The Smartest Guys In The Room

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 in the Room, from cognitive moral development to group norms, etc.

Enron scandal overview

The Enron scandal was a financial scandal involving Enron Corporation and its accounting firm Arthur Andersen, that was revealed in late 2001. Many of Enron's recorded assets and profits were inflated, or even fraudulent and nonexistent. Debts and losses were put into entities formed "offshore" that were not included in the firm's financial statements, and other sophisticated and hidden financial transactions between Enron and related companies were used to take unprofitable entities off the company's books. This practice drove up their stock price to new levels, at which point the executives began to work on insider information and trade millions of dollars worth of Enron stocks. The executives and insiders at Enron knew about the offshore accounts that were hiding losses for the company; however, the investors knew nothing of this. As the scandal was revealed, Enron shares dropped from over $90 to les...

... middle of paper ...

...rd did not pay attention to the employees because most directors in the United States do not consider that their responsibility. They consider themselves representatives of the shareholders only, and not of the employees. However, in this case they did not even represent the shareholders well and particularly not the employees who were shareholders. They were those who could made decision, but they put too much trust on the management team and didn’t catch their people doing things right or wrong in time.

Conclusion

The Enron scandal is the most significant corporate collapse in the United States in the century. This scandal demonstrates the need for significant reforms in accounting and corporate governance in the United States, as well as for a close look at the ethical quality of the culture of business generally and of business corporations in the United States.