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Ethical and legal issues that faced Enron
Ethical and legal issues that faced Enron
Enron case study facts and summary
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I would like to propose the following changes and/or additions to the Security and Exchange Commission’s regulations. These changes are in regards to the last ten years of corporate fraud in the financial world involving such companies as Enron, WorldCom, Tyco, and Xerox. The primary changes include the addition of a Reserve Bond and an adjustment in the Bounty Payment program. Secondary changes include a Board of Directors mix-up program for securities companies, and SEC involvement in external auditing. Reason / Background The major downfall and/or reorganization of companies have cost: lost securities, downsized or vacancies in employment, lost or minimized retirements, and assisted in the economic recession. The following companies have been involved in varying experiences that led to financial improprieties and unethical decisions. Enron “Boosted profits and hid debts totaling over $1 billion by improperly using off-the-books partnerships; manipulated the Texas power market; bribed foreign governments to win contracts abroad; manipulated California energy market” (Brag, 2002, para. 9). The behavior exhibited by Enron’s former CEO Kenneth Lay showed that large and successful appearing companies are not exempt from human error. This human error caused unethical decisions to be made that adversely affected thousands of lives. WorldCom’s lack of corporate governance and questionable financial follies led to “Overstated cash flow by booking $3.8 billion in operating expenses as capital expenses; gave founder Bernard Ebbers $400 million in off-the-books loans” (Brag, 2002, para. 21). This unethical behavior led to even more financial losses after further investigations, and resulted in billions of dollars in losses... ... middle of paper ... ... (2008). Retrieved from http://www.caslon.com.au/whistlecasesnote.htm#xerox Hansen, K. O., Valesquez, M., Moberg, D., & Calkins, M. (n.d). What Really Went Wrong With Enron? A Culture of Evil?. Retrieved from http://www.scu.edu/ethics/publications/ethicalperspectives/enronpanel.html Kotz, D. H. (2010, March 29). Assessment of the SEC’s Bounty Program (Assessment United States Security and Exchange Commission 474). Retrieved from Security and Exchange Commission: http://www.sec-oig.gov/reports/auditsinspections/2010/474.pdf Lyke, B., & Jickling, M. (2002, August 29). WorldCom: The Accounting Scandal (Report). Retrieved from U.S Department of State: http://fpc.state.gov/documents/organization/13384.pdf Retrieved from http://money.cnn.com/2005/06/17/news/newsmakers/tyco_trialoutcome/index.htm Retrieved from http://www.forbes.com/2002/07/25/accountingtracker.html
The Enron Corporation was founded in 1985 out of Houston Texas and was one of the world 's major electricity, natural gas, communications, and pulp and paper companies that employed over 20,000 employees. This paper will address some of the ethical issues that plagued Enron and eventually led to its fall.
Thirteen years ago, the biggest energy company in the world experienced the biggest accounting scandal of the century. The company was called Enron and was doing very well in business but unfortunately, after many bad decisions were made by the executives of the company, Enron went bankrupt. The executives of Enron were essentially gamblers in the stock market. They took terrible risks and misreported their financial standings in order to encourage people to invest in their stocks. When the stocks crashed in 2001, these people fell victim to the lies and misleading information that Enron reported. Finally, Enron had reached the point of no return and was bankrupt. Arthur Andersen was a company that had a significant role in Enron’s collapse.
Applying the idea of moral goodness with business, however, is often a contradictory concept in lieu of the malicious and often scandalous behavior that businesses are notoriously publicized with. Enron, an energy company based out of Houston, Texas, is perhaps the most popular of scandals of the century thus far. Their name is synonymous with corporate fraud and corruption after the allegations of accounting fraud hit the headlines in 2001. The scandal was also considered a landmark case in the field of business fraud and brought into question the accounting practices of many corporations throughout the US (Raslan, 2009). Under this shroud of deceptive business practices and activities, applying the idea of moral goodness with business is a difficult sell to readers.
Romero, S., & Berenson, A. (2002, June 26). WorldCom says it hid expenses, inflating cash flow from $3.8 billion. The New York Times. Retrieved from http://www.nytimes.com
The film Enron: The Smartest Guys in the Room was a great film loaded with examples of unethical behavior with Enron being an unethical corporate culture. The film portrays the rise and fall of Enron, one of the most corrupted corporations this country has seen. Enron had started off as a promising energy company with a vision to do good which quickly turned sour when top executives torn the company down while stealing millions of dollars from people. A reason for the downfall of Enron was the deregulation of electrical power markets which fueled the greed of Enron’s officials. They were the ones that transformed Enron from a traditional energy company into an energy broker.
the social world of Enron. The fact that they took the form they did and to such a pronounced degree are certainly troubling and perhaps surprising. What should not be surprising is the role such ritualization processes played in the development of this type of deviance, given recognition of their importance in social relationships and organizations.
In many Universities today it is mandatory to take an ethics class. This is not to provide students with an ethical behavior but to provide education of companies that have found themselves in ethical predicaments and how they dealt with them. One of the most recent ethical issues that have taken place would be the Enron collapse. The Enron Corporation was founded in 1985 out of Houston, Texas and was one of the world 's major electricity, natural gas, communications, and pulp and paper companies that employed over 20,000 employees. With the help from Arthur Andersen the outside accounting firm and Vinson & Elkins Enron’s law firm, these three companies participated in an unethical practice that is still being dealt with today. This paper will
I do not condone Enron’s deceptive accounting shenanigans. While they had been originally made their decisions in the name of the greater good, however, in spite of this massive display of
In (Complaint 17588)we find that they were directly involved in a fraudulent improper accounting scheme. With the intent to manipulate said earnings to keep them on point with Wall Street's expectations as well as support WorldCom's stock price.
WorldCom started out as Long Distance Discount Services (LDDS) a long distance telephone service provider from Mississippi 1983. Bernard Ebbers was selected as their CEO and with his help; WorldCom was placed as number 52 on the Fortune 500 Companies in 2001.( ) The company’s success came from their ability to provide an alternative to the major long distance carriers by tailoring service to each customers calling patterns. Through acquisitions of multiple companies allowed LDDS to grow at a very rapid rate. The fraud began in the late 1990’s; the company's revenue stream had slowed so the stock price of the company was falling. The company took 2.8 billion out of reserve that was meant to cover liabilities in some of the companies it had acquired, and then put that money into its revenue line in the financial statements.( ) By 1998, their stock was slowly declining. During 2001, Ebbers persuaded the board of directors to provide him corporate loans. Ebbers wanted to cover the margin, but the strategy ...
Wilson, A. C., & Key, K. G. (2012). Enron: A Case of Deception and Unethical Behavior. Feature Edition, 2012(1), 88-97.
When codes of ethics are breached, positive outcomes are rare. An illustrative case is the now defunct Enron Corporation. In the movie, Enron: The Smartest Guys in the room, (Gibney A, 2005) We observed how Enron traders sham...
The Enron Corporation was an American energy company that provided natural gas, electricity, and communications to its customers both wholesale and retail globally and in the northwestern United States (Ferrell, et al, 2013). Top executives, prestigious law firms, trusted accounting firms, the largest banks in the finance industry, the board of directors, and other high powered people, all played a part in the biggest most popular scandal that shook the faith of the American people in big business and the stock market with the demise of one of the top Fortune 500 companies that made billions of dollars through illegal and unethical gains (Ferrell, et al, 2013). Many shareholders, employees, and investors lost their entire life savings, investments,
Wilson, A. C., & Key, K. G. (2012). Enron: A Case of Deception and Unethical Behavior. Feature Edition, 2012(1), 88-97.
When an ethical dilemma arises within an organization, it is difficult to separate right and wrong with what is best for the majority. Sometimes the answer is not a simple “yes” or “no.” In 2002, Enron Corporation shows us just that. By 2002, the sixth-largest corporation in America filed for Chapter 11 bankruptcy. The case of the Enron scandal is one of the best examples of corporate greed and fraud in America.