In the movie Wall Street, Gordon Gekko stated, “Greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms: greed for life, for money, for love, knowledge, has marked the upward surge of mankind” (Mali, 2013, para. 8). This quote accurately identifies the motivation behind the actions of Bernie Madoff and Enron. Both Madoff and Enron were greedy in conducting business. Both violated corporate ethical issues as they acted fraudulently to steal money from clients and shareholders. Bernie Madoff was a once famous stockbroker, investment advisor, and financier prior to committing fraud and running the largest financial scheme in American history. He gained people’s trust by his reputation and the contents of his resume. Ultimately, his Ponzi scheme scammed hundreds and thousands of dollars out of the pockets of his clients. Enron, a natural gas company, hid a debt of billions from failed projects and deals. The company was able to continue to operate due to loopholes and poor financial reporting. Both of these cases are examples of ethical irresponsibility. They are prime examples of why having a code of ethics is just not enough. Companies must create a culture that instills a strong sense of ethics and integrity and eliminates anyone who threatens or violates this established culture.
Bernie Madoff, along with his wife, founded Bernard L. Madoff Investment Securities, LLC. The company “attracted investors through word-of-mouth and amassed an impressive client list” (Bernard Maddoff Biography, 2014, p. 1). The company was well-known for its 10% or more reliable returns (Bernard Madoff Biography, 2...
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...The Sarbanes-Oxley Act deals with the proper filing of financial paperwork along with rules and regulations to follow while working as a top business (The Sarbanes-Oxley Act, 2002). Some of the consequences that derived from the Act include fines and possible imprisonment up to 20 years for destroying documents. It also made it a crime to destroy corporate audit records. Since the Sarbanes-Oxley Act was in place at the time Bernie Madoff was charged with security fraud, he received 25 years in prison for his wrong-doings (Bernard Madoff, 2014). These crimes by Madoff and Enron have made for safer business practices and stricter laws. However, to ensure cases of this magnitude do not occur again, companies must not only abide by mandated law, they must develop a culture deeply rooted in strong ethics. Character matters in a business just like it does in people.
Madoff started the scheme by misleading his clients to think that he was an elite investor because he was on a vast amount of important boards. Many believed the scheme and invested billions of dollars with Madoffs company. He was able to achieve some of the scheming through running his investments through a different part of his business. This was a way for only him to see the investments and the financial reports behind the investments. Bernard Madoff involved people
Another reason for Enron’s bankruptcy was the unnecessary personal spending by corporate managers. It was a direct loss to the company’s shareholders. In the later stages before its bankruptcy, the luxuries were paid from the company’s borrowing, as it had no real profits. Therefore in the later stages, the creditors were at a loss rather than its shareholders.
“Bernie Madoff began investing in penny stocks in 1960, and due to his impressive work ethic, received several big breaks. The first of which was his father in-law loaning him $50,000 to invest, and soon after, Carl Shapiro, a man who made his fortune in women’s clothing gave Madoff $100,000 to invest on his behalf” (Collins 2011). With this kick-start, Bernie quickly began making a name for him, especially as he promised clients a guaranteed 20% annual return on investment. This, coupled with his firm’s adoption of the latest technology made them a tour-de-force in the investment world. But what makes his eventual downfall more interesting is that he was not just a crook, Madoff did manage a successful, and legitimate brokerage firm. To some extent, the credibility he earned from these legitimate busines...
The CFO, Andrew Fastow, systematically falsified there earnings by moving company losses off book and only reporting earnings, which led to Enron’s bankruptcy. Any safeguards or mechanisms that were in place to catch unethical behavior were thrown out the window when the corporate culture became a situation where every person was looking out for their own best interests. There were a select few employees that tried to get in front of the unethical accounting practices, but they were pushed aside and silenced. The corporate culture at Enron became a place where if an employee would not make unethical decisions then they would be terminated and the next person that would make those unethical decisions would replace them. Enron executives had no conscience or they would have cared for the people they ended up hurting. At one time, Enron probably was a growing company that had potential to make a difference, but because their lack of social responsibility and their excessive greed the company became known for the negative affects it had on society rather than the potential positive ones it could have had. Enron’s coercive power created fear amongst the employees, which created a corporate culture that drove everyone to make unethical decisions and eventually led to the downfall and bankruptcy of
All in all, I believe and the evidence points to the Madoff scheme taking place because of an ethical dilemma. It’s important to stand strong in your values and do the right thing because not only does that benefit you, but also it benefits the organization you are a part of and with enough ethical people ponzi schemes like the Madoff case can be prevented.
While this is a type of corporate culture, it plays a significant enough role in corporate crime that I’m going to touch on it individually. The goal of most every company is to make a profit, but when corporate profit is put above all else, it can easily lead to corporate crime. The phrases ‘profit over people’ and ‘money over morality’ come to mind here, especially when thinking about Enron. One example of Enron putting company profits above all else occurred during the California Energy Crisis. Enron traders learned that by manually shutting down power plants they could create artificial power shortages during California’s already occurring energy crisis. This would send energy prices sky rocketing. These traders would then bet on the price of energy rising, which it did, making them around 2 billion dollars. While those at Enron were fixated on the drive for profit, they were unconcerned with the consequences these outages had such as people getting stuck in elevators, fatal car crashes due to traffic light malfunctions, and deadly
Throughout the past several years major corporate scandals have rocked the economy and hurt investor confidence. The largest bankruptcies in history have resulted from greedy executives that “cook the books” to gain the numbers they want. These scandals typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of assets or underreporting of liabilities, sometimes with the cooperation of officials in other corporations (Medura 1-3). In response to the increasing number of scandals the US government amended the Sarbanes Oxley act of 2002 to mitigate these problems. Sarbanes Oxley has extensive regulations that hold the CEO and top executives responsible for the numbers they report but problems still occur. To ensure proper accounting standards have been used Sarbanes Oxley also requires that public companies be audited by accounting firms (Livingstone). The problem is that the accounting firms are also public companies that also have to look after their bottom line while still remaining objective with the corporations they audit. When an accounting firm is hired the company that hired them has the power in the relationship. When the company has the power they can bully the firm into doing what they tell them to do. The accounting firm then loses its objectivity and independence making their job ineffective and not accomplishing their goal of honest accounting (Gerard). Their have been 379 convictions of fraud to date, and 3 to 6 new cases opening per month. The problem has clearly not been solved (Ulinski).
Bernard Madoff had full control of the organizational leadership of Bernard Madoff Investments Securities LLC. Madoff used charisma to convince his friends, members of elite groups, and his employees to believe in him. He tricked his clients into believing that they were investing in something special. He would often turn potential investors down, which helped Bernard in targeting the investors with more money to invest. Bernard Madoff created a system which promised high returns in the short term and was nothing but the Ponzi scheme. The system’s idea relied on funds from the new investors to pay misrepresented and extremely high returns to existing investors. He was doing this for years; convincing wealthy individuals and charities to invest billions of dollars into his hedge fund. And they did so because of the extremely high returns, which were promised by Madoff’s firm. If anyone would have looked deeply into the structure of his firm, it would have definitely shown that something is wrong. This is because nobody can make such big money in the market, especially if no one else could at the time. How could one person, Madoff, hold all of his clients’ assets, price them, and manage them? It is clearly a conflict of interest. His company was showing high profits year after year; despite most of the companies in the market having losses. In fact, Bernard Madoff’s case is absolutely stunning when you consider the range and number of investors who got caught up in it.
Bernie Madoff is one of the greatest conmen in history. The Bernie Madoff scandal takes the gold as one of the top ponzi schemes in America. Madoff started the Wall Street firm, Bernard L. Madoff Investment Securities LLC, in 1960. Starting off as a penny stock trader with five thousand dollars, earned from his workings as a lifeguard and sprinkler installer, his firm began to grow with the support of his father-in-law, Saul Alpern, who helped by referring a group of close friends and family. Originally, his firm was marketed by the National Quotations Bureau’s Pink Sheets.
middle of paper ... ... They had complete disregard for ethical standards that they should have looked towards when making their decisions. They allowed greed, and notoriety, to take over their basic perceptions of what is right, and what is wrong. So in conclusion, I have provided my analysis of ethical behavior that surrounded the financial events of Bernie Madoff, and the events that surrounded Enron.
After news of the scandal of Enron, one of the hottest items on e-Bay was a 64-page copy of Enron’s corporate code of ethics. One seller/former employee proclaimed it had “never been opened.” In the forward Kenneth L. Lay, CEO of Enron stated, “We want to be proud of Enron and to know that it enjoys a reputation for fairness and honesty and that it is respected (Enron 2).” For a company with such an extensive code of ethics and a CEO who seemed to want the company to be respected for that, there are still so many unanswered questions of what exactly went wrong. I believe that simply having a solid and thorough code of ethics alone does not prevent a company from acting unethically when given the right opportunity.
“When a company called Enron… ascends to the number seven spot on the Fortune 500 and then collapses in weeks into a smoking ruin, its stock worth pennies, its CEO, a confidante of presidents, more or less evaporated, there must be lessons in there somewhere.” - Daniel Henninger.
Egoism focuses on what is best for one’s self. The top executives may have followed this ethics system because they made millions of dollars off of the Enron scandal even though they knew what they were doing was wrong. Since they were doing what was best for them, they must have been acting ethically. It could also be argued that utilitarianism was at work in regards to the Enron scandal. Utilitarianism holds that an action is ethical if it does the greatest amount of good for the greatest number of people. The end justifies the means. By manipulating their statements, Enron was helping all of their employees and shareholders to keep their jobs and money. This justified and made their choice to lie on their statements the ethical decision to
Through an organizational culture that focused on financial greed for self, illegal accounting practices, conflicts of interest partnerships, illegal business dealings, fraud, negligence, and massive corruption at all levels, the Enron scandal help to create new laws and regulations with stiff penalties if violated (Ferrell, et al, 2013). The federal government implemented the Sarbanes Oxley Act (SOX) (Ferrell, et al, 2013).
When an ethical dilemma arises within an organization, it is difficult to separate right and wrong from what is best for the majority. Sometimes the answer is not a simple “yes” or “no.” In 2002, Enron Corporation showed 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.