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Utilitarianism compared to deontology
Utilitarianism compared to deontology
Enron case study facts and summary
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CEO Kenneth Lay’s ambition for ENRON a company he had helped form went beyond the business of piping gas. Enron went to become the largest natural gas merchant in North America and the United Kingdom. But the reality is, this company business model never worked. This was a company that was so desperate to win Wall Street 's respect that it kept it stocks shares prices going up despite the losses it was incurring in order for executives to keep lining their own pockets. Over the course of this Case Assignment, I will identify the examples of financial reporting misconduct, I will explain the deontological as well as a utilitarian ethical perspective and lastly I will identify the stakeholders likely to be affected by that misconduct. Enron …show more content…
Stock hit an all-time high of 90 dollars a share, the market valuation of 70 billion dollars, and was named in 2001 America 's Most Innovative Company by Fortune for six consecutive years between 1996 and 2001. As Enron expanded, there was little scrutiny of how it was managing the expansion; this allowed Kenneth Lay to completely misrepresented financial reality, Enron was participating in several serious financial reporting misconduct to include; “Creative accounting- allowed Enron to appear more powerful on paper than it really was. Special purpose entities – subsidiaries that have a single purpose and that did not need to be included in Enron 's balance sheet, balance sheet – were used to hide risky investment activities and financial losses. Forensic accounting later determined that many of Enron 's recorded assets and profits were inflated, and in some cases, completely fraudulent and nonexistent. Some of the company 's debts and losses were recorded in offshore entities, remaining absent from Enron 's financial statements.” (Folger, 2011). Kenneth Lay and the senior leadership were more concern with the results vice the financial reality, they were willing to enforce unethically decisions to benefit the organization; decisions made by senior manager to mislead Wall Street 's may have been, in his opinion, as an ethically correct way to benefit the shareholders and stakeholders, by portraying to be financially strong. However, the consequences of this action did not benefit the organization as a whole instead it only benefited Jeff Skilling and senior
Ethics policies are implemented in almost all businesses. Companies search for candidates that will be moral in their actions so they can ensure long-term financial success. Throughout history we have seen businesses fall due to unethical behavior. In recent years the business Enron Corporation is best known for the scandal that led to the bankruptcy of a company with more than 60 billion dollars in assets. We will examine the circumstances that led to the downfall of Enron, how the scandal was realized, as well as the outcome of one of the largest bankruptcies in American history; a case that exemplifies unethical professional behavior.
Enron was an energy company founded in 1985 that was in the business of “trading commodities, which soon became the largest business site in the world” (Cbc.ca, 2006). By the end of 2001 it was discovered that Enron had created a “complex web of partnerships” (Cbc.ca, 2006) to hide the level of its level of debt and to artificially inflate stock prices. This financial fraud played out in a company whose “ethics code was based on respect, integrity, communication, and excellence (Cengage.com, n.d.). It is evident that these values were a superficial layer of outward facing trust that masked the problems inherent in the company where the espoused values are not the enacted values (Lecture Slides: Slippery Slopes). These problems are “rooted in
Enron deliberately created artificial shortages in California for electricity, two days in a row, causing the price to skyrocket. Enron is a natural gas and electricity plant/business that buys and sells energy. The most influential historical event that has happened during the 21ST century is The Enron Scandal because the loss sustained by investors exceeded $70 billion and only a small amount of the lost money was returned.
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.
The overall view clarification of the issue illustrates the evolution of Enron’s innovations and fraud. The business records of the company financial economists and accountant’s uncovered considerable number information and incentive issues. The issues both complicate and potentially resolve the appraised valuation questions such as; earnings growth, stock splits, dividend changes, free cash flow limitations, share price-based compensation and hedging of market risks. The Enron Company contributed large sums of money to non-profit organizations for the purpose of acting on probable ethical issues before they become legal dilemmas. The company failed to inform its consumers of the business decisions made even though they had knowledge that the person at the other end of the business deal did not. The Enron Company filed a Chapter 11 to seek bankruptcy protection. The uncertainty of the company’s standings impacted the market’s confidence in...
Enron was the country’s largest trader and marketer for electric and natural gas energy. Its core business was buying energy at a negotiated price and later, selling the energy when prices increased. As an energy broker, Enron provided a service by allowing producers to negotiate a certain price while Enron took the risk that prices would fall below what it bought energy. Buyers of energy also benefited because Enron could ensure the supply of energy. In 2000 Enron was listed number five on the Fortune 500. What happened to the company which was among the most admired for vision and quality thinking? Enron was the company that held virtual assets and not the real assets, such as power stations, which were capital incentive with low returns and ongoing debt.
The three main crooks Chairman Ken Lay, CEO Jeff Skilling, and CFO Andrew Fastow, are as off the rack as they come. Fastow was skimming from Enron by ripping off the con artists who showed him how to steal, by hiding Enron debt in dummy corporations, and getting rich off of it. Opportunity theory is ever present because since this scam was done once without penalty, it was done plenty of more times with ease. Skilling however, was the typical amoral nerd, with delusions of grandeur, who wanted to mess around with others because he was ridiculed as a kid, implementing an absurd rank and yank policy that led to employees grading each other, with the lowest graded people being fired. Structural humiliation played a direct role in shaping Skilling's thoughts and future actions. This did not mean the worst employees were fired, only the least popular, or those who were not afraid to tell the truth. Thus, the corrupt culture of Enron was born. At one point, in an inter...
converted the company to a mark to market accounting system allowing for them to book future profits the moment a contract was signed regardless of actual profits made opening the door for Enron to claim profits to be whatever they said they were. Desperate to believe Enron was a success at once even declaring, “I am Enron”. At the time if a company met or surpassed the projections of the analysts the stock went higher. At Enron top executive participated in what is pump and dump in which they would push the stock price up and then cash in their multi-million dollar options, and no one was better at it. But in reality their natural reserves around the world, and their company, were losing money. They built particularly big in India, where most people were afraid to build up at that time. Refusing to admit failure even after projects lost money like the project in India that lost a billion dollars and yet paid out millions of dollars in bonuses based on fake profits. Or their broadband service, partnered with Blockbuster that sent stock prices soaring yet again even though it didn’t work. A merger with Portland General Electric enabled Enron to further take advantage of deregulation, in California. Workers for PGE whose pensions had been converted into Enron Stock thought their money was safe and put even more of their own money it into the company. Meanwhile Jeff Skilling had the analysts in love with him. Rather
America. Mr. Kenneth Lay Enron has been responsible for the imprisonment of many corporate leaders in America. The Securities and Exchange Commission had been investigating Enron on their accounting practices for many years. The high ranked Executives that we involved with Enron were falsifying accounting records and inflating losses and liabilities. The lack of Business ethics, and disregard for the law to the public and other consumers is completed unacceptable and rightfully so CEO’s have been imprisoned for such inexcusable acts of illegal actions.
Enron Corporation was based in Houston, Texas and participated in the wholesale exchange of American energy and commodities (ex. electricity and natural gas). Enron found itself in the middle of a very public accounting fraud scandal in the early 2000s. The corruption of Enron’s CFO and top executives bring to question their ethics and ethical culture of the company. Additionally, examining Enron ethics, their organization culture, will help to determine how their criminal acts could have been prevented.
Unethical accounting practices involving Enron date back to 1987. Enron’s use of creative accounting involved moving profits from one period to another to manipulate earnings. Anderson, Enron’s auditor, investigated and reported these unusual transactions to Enron’s audit committee, but failed to discuss the illegality of the acts (Girioux, 2008). Enron decided the act was immaterial and Anderson went along with their decision. At this point, the auditor’s should have reevaluated their risk assessment of Enron’s internal controls in light of how this matter was handled and the risks Enron was willing to take The history of unethical accounting practic...
Enron was on the of the most successful and innovative companies throughout the 1990s. In October of 2001, Enron admitted that its income had been vastly overstated; and its equity value was actually a couple of billion dollars less than was stated on its income statement (The Fall of Enron, 2016). Enron was forced to declare bankruptcy on December 2, 2001. The primary reasons behind the scandal at Enron was the negligence of Enron’s auditing group Arthur Andersen who helped the company to continually perpetrate the fraud (The Fall of Enron, 2016). The Enron collapse had a huge effect on present accounting regulations and rules.
Due to an understatement of debts, the company was considered bankrupt in 2001. Shareholders lost $74 billion and a lot of jobs were lost because of the bankruptcy. The share prices of Enron started falling in 2000 and in 2001 the company revealed a huge loss. Even after all this, the company’s executives told the investors that the stock was just undervalued and they wanted their investors to keep on investing. The investors lost trust in the company as stock prices decreased, which led the company to file bankruptcy in December 2001.
Enron formed in 1985 when InterNorth merged with Houston Natural Gas, whose CEO Kenneth Lay would become the CEO of the newly formed Enron, who at its peak was worth 70 billion dollars. Lay held a Ph.D. in Economics. Lay was also a contributor to being granted deregulation and the ability to sell energy on the free market. It was this deregulation that caused Ken Lay to see the money he could make in energy and what ultimately caused Enron to form. This is what Ken Lay had dreamed of since he was a child, not wanting to be poor. And Enron was going to deliver this to him. After-all he had something the whole world needed (energy with a price that flowed and fluxed with the market). Combine this with his ability to create a market which allowed
The Enron case is very intriguing case of corporate corruption and greed. As we review some of the company’s facts and history along with other areas of the corporation, we can see that this case is filled with great examples of business ethics put to the