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 started in the mid 1980’s with the merger of two major natural gas companies. The company grew to become the largest vendor of natural gas in the United States. Enron was very profitable …show more content…
CEO Jeffery Skilling and Kenneth Lay, the CEO prior to Skilling, were taken to trial. They were both found guilty of committing multiple types of financial crimes, and sentenced to 24 years in prison. CFO Andrew Fastow was also taken to trial and was found guilty and sentenced to 10 years in federal prison. The collapse of such a large corporation led to changes in financial controls. U.S. Congress passed the Sarbanes-Oxley Act in 2002. The SOX Act protects investors from deceitful accounting actions by companies (4). The Financial Accounting Standards Board increased its ethical behavior. FASB is responsible for generally accepted accounting principles, which provides standards for financial statements of publicly traded companies. These changes brought to life after the Enron scandal have decreased fraud and increased investor confidence. Although the acts that Enron committed were immoral and destroyed thousands of lives, it has lead an increase of controls and compliance, preventing something like this from happening in the
...FO at the Houston airport. While Mr. Fastow's parents were undergoing a random search, he stopped to chat with Mr. Schwieger. "I never got an opportunity to explain the partnerships to you," he said, according to Mr. Schwieger. Mr. Schwieger replied, "With everything that has come to light, I probably wouldn't like the answer I would have gotten."
The culture promoted by Enron was one of intense competition and achievement that fostered unethical behaviour for fear of losing one’s job or of company failure. Individuals were urged to “make the numbers…[and] if you steal, if you cheat, just don’t get caught” (Cengae.com, n.d.). This sort of unspoken message would have not only created a widespread participation in unethical behaviour but also downplayed the repercussions of this sort of behaviour as the company itself was promoting it, so the internal consequences would be
Most people usually work from rags to riches, but, this is not the case with the Enron Scandal. In 1985 Ken Lay created Enron when he merged two companies in the Natural Gas industry. Moving into the early 90s, he aided in the selling of electricity at regular market prices. Following this initial action, the US Congress approved the deregulation in the sale of natural gas. This caused Enron to be able to sell the energy at higher costs, increasing their profit.
Prior to watching the movie "The Smartest Guys in the Room" and learning in class in depth about the Enron scandal and the counterparts that had hands in it I didn 't know much about it nor the effects it had on the way companies are regulated today. Prior knowledge of the Enron case was learned in my auditing class but only briefly to provide an introduction to the Sarbanes-Oxley Act passed in 2002 by Congress to protect investors from the possibility of fraudulent accounting activities by corporations. The Sarbanes-Oxley Act (SOX) mandated strict reforms to improve financial disclosures from corporations and prevent accounting fraud. Overall it was made to address systematic flaws in the way of corporations had been reporting their numbers.
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
"This is why the market keeps going down every day - investors don't know who to trust," said Brett Trueman, an accounting professor from the University of California-Berkeley's Haas School of Business. As these things come out, it just continues to build up"(CBS MarketWatch, Hancock). The memories of the Frauds at Enron and WorldCom still haunt many investors. There have been many accounting scandals in the United States history. The Enron and the WorldCom accounting fraud affected thousands of people and it caused many changes in the rules and regulation of the corporate world. There are many similarities and differences between the two scandals and many rules and regulations have been created in order to prevent frauds like these. Enron Scandal occurred before WorldCom and despite the devastating affect of the Enron Scandal, new rules and regulations were not created in time to prevent the WorldCom Scandal. Accounting scandals like these has changed the corporate world in many ways and people are more cautious about investing because their faith had been shaken by the devastating effects of these scandals. People lost everything they had and all their life-savings. When looking at the accounting scandals in depth, it is unbelievable how much to the extent the accounting standards were broken.
The Enron Corporation was born in the recession following the oil and energy crises of the 1970’s. Houston Natural Gas Company’s (HNG) CEO Kenneth Lay engineered a merger with Internorth Incorporated (Internorth) (Free, Macintosh, Stein, 2007, page 2), the CEO of Internorth, Samuel Segner, resigning six months following passing the title and responsibilities of CEO to Kenneth Lay. Enteron was born shortly afterwards as the HNG/Internorth merger rebranded first to Enteron then quickly shortening this to Enron in 1986. This newly formed company owned the second largest gas pipeline network in the US employing 15000 workers with $12.1 billion of assets; however alongside this came large amounts of debt with first year loss of $14million.During the initial years the newly formed company struggled as a traditional natural gas supplier within the regulated energy markets. The American governments change in policy regarding energy markets, with market deregulation being driven forward by new policy, opened up new possibilities for the struggling firm and paved the way to its rise to power.
Enron started about 18 years ago in July of 1985. Huston Natural Gas merged with InterNorth, a natural gas company. After their merge they decided to come up with a new name, Enron. Enron grew in that 18-year span to be one of America's largest companies. A man named Kenneth Lay who was an energy economist became the CEO of Enron. He was an optimistic man and was very eager to do things a new way. He built Enron into an enormous corporation and in just 9 years Enron became the largest marketer of electricity in the United States. Just 6 years after that, in the summer of 2000 the stock was at a tremendous all time high and sold for more than 80 dollars a share. Enron was doing great and everything you could see was perfect, but that was the problem, it was what you couldn't see that was about to get Enron to the record books.
United States Enron was an energy base company that was based out of Houston Texas. Enron
One of the most popular business bankruptcies and collapses known to date is that of the Enron Corporation. Enron, once known as "America's Most Innovative Company" by Fortune Magazine six straight years from 1996 to 2001. Enron seemed to be doing very well until the summer of 2001 generating a lot of cash and new businesses, but in October of 2001 Enron was forced to disclose that their accounting practices had been very creative, and failed to follow generally accepted accounting principles. Profits that had been soaring sky high were wiped away and replaced with enormous losses and charges that were never recorded properly. Unfortunately, Enron executives who were responsible for the shady accounting practices, were able to escape this debt by selling off most or all of their shares in the company (valued at over 10 million dollars) before the stock price fell greatly. They also froze employee's pension plans, and many people lost their jobs in the wake of the collapse and found out their retirement was history (Anonymous, 2002).
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.
It was discovered that Enron’s stated financial condition was prolonged by established, inventively, and methodically planned accounting fraud at the end of 2001. It has been since called the Enron scandal. Enron has subsequently become a popular example of deliberate corporate corruption and fraud. This scandal
The main ethical issue with the Enron scandal is that Enron allowed legal loopholes to supersede ethical principles (Bowen & Heath, 2005). Enron used legal principles to justify what they were doing instead of acknowledging that the accounting processes they were using were unethical. Another one of the ethical issues is that Enron faced was that
In conclusion, about Enron, we saw the shortcoming of individuals. There was also lack of Leadership, ethical culture and behavior. The officials of Enron are truly savvy folks. However, they wrecked the fortune they assembled in many years furthermore hurt numerous financial specialists. The key reason for this disaster is that they do not have the thought of the business ethic. Therefore, when the administrators experience issues, they picked the wrong
This paper will analyze Enron’s Code of Ethics and examine the sections on values and corporate responsibility. The paper will use applicable theories and concepts and will detail Ken Lay’s view of ethics and Enron’s corporate social performance. The paper will argue that Enron was not being socially responsible to all of its stakeholders because it deceived employees and investors about its real financial status despite having stated in its company code of ethics that transparency, integrity, and respect for the law would be the cornerstones of its daily operations.