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Enron ethical violations
Enron: What caused the ethical collapse
The downfall of enron the real reasons
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The main reason that contributing to the failure of Enron was greed. It has begun from the moment that Jeff Skilling has incorporated mark to market accounting into Company’s policies, and then the system was taken advantage of it. The bonuses that the executives was paid out to employees were based on speculations in futures that were never done or accomplished again like it used to be. The company spent several t years by trying to generate new revenue streams in order to make their company successful like they promised to be. However, some times the revenue stream was sustained through unethical. Greed and cutthroat attitudes were ingrained to the company’s corporate culture and the employees were manipulated the system in order to …show more content…
20000 employees has lost their job when Enron corporation wasbankrupt. The amount that was paid was $4500 while the top executives collected final bonuses totaling $55 Million.The study shows that in 2001 Enron employees has lost Billions dollards in retirement and pensions funds. Meanwhile the executives has sold more than $110 Million in stock like the company was under. Despite to make remorseful statement according to the employees of the company, the executives manifest throughout the life of the Enron which was no end to the corporate greed. While I was trying to visit the Enron website page , there was a link to an investor relations site where the former Enron shareholders are still engaged in a lawsuit with the former executives. some of these investors are former employees who are seeking some semblance of retribution for how they hab been treated and for being lied . Another reason of the outcome of the Enron company’s scandal for line level is that the employees were the dissolution of Arthur Andersen.” The Country’s oldest accounting firm voluntarily gave up their license in the wake of handling Enron’s accounting audit function.” Over 22,000 employees at Enron have lost their jobs and the reputation of the company was still tarnished,even though it was not involved with the Enron Audit or …show more content…
Both of them were escaped criminal charges and cashed in high amounts of company stock in the years leading up to the collapse. The article in Financial News “The Enron Cast: Where are they now?” Jeff Skilling former CEO and COO paid attorneys a $23 Million retainer to pledge his innoncent but he was guilty of the fraud. Now He is serving a 24 year prison that his lawyers are still fighting every day at the court and on every ground for appeal available to them. If he accept the 24 years in a proper federal penitentiary that can be sufficient recourse for his actions that he committed. Kenneth Lay was convicted of more than 5 counts of fraud and 2 cases of conspiracy; he faced up more than150 years in the prison but he died of a heart attack before even he could ever be processed. He died on a ski vacation in Colorado, and likely paid for with the money he has effective stolen from company investors. CFO Andrew Fastow has served for 5 years in exchange for cooperation with prosecutors and testimony against other company
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.
The Organisation would create an asset, such as power plant, and immediately claim the projected profit on its books, even if the asset had not made a cent. If the projected revenue were less than actual revenue, the company would then transfer the asset to an off-the-books corporation (which Enron created) where the loss would go unreported. This created the attitude that the company did not need to make profits, because any debt could simply be written off without hurting the company’s value by using this mark-to-market method, which resulted in the company appearing to be more profitable then it actually was and high ranked executives profited on the share price.
The Fastows headed to Mrs. Fastow's native Houston in 1990, both taking jobs at a young company called Enron. Just five years old, Enron was starting to evolve from a natural-gas and pipeline company into a trading firm. Mr. Fastow was one of the first managers hired by Mr. [Jeffrey Skilling], who himself had only recently arrived, from management consultants McKinsey & Co. Brought into Mr. Skilling's inner circle, Mr. Fastow returned the loyalty, telling colleagues he had named a child after his mentor. When Mr. Skilling became Enron's president and chief operating officer in early 1997, he and Mr. [Kenneth Lay] promoted Mr. Fastow to lead a new finance department. A year later, Mr. Fastow became chief financial officer.
The Enron scandal is one of the biggest scandals to take place in in American history. Enron was once one of the biggest companys in the world. It was the 6th largest energy company in the world. Due to Enron’s downfall investors of the company lost nearly 70 billion dollars. This was all due to many illegal activities done by Eron's employees. One of these employees was Andrew Fastow, the chief financial officer of the Enron corporation had a lot to do with the collapse of the Enron company.
The Enron Corporation was committed to pushing the legal limit as far as possible. Many individuals only seeking to promote their own well-being over any legal or ethical boundaries did this. This was not only isolated with the Enron Corporation, as Arthur Andersen the outside accounting firm and Vinson & Elkins Enron’s law firm were also participants. The key players that led to the collapse of Enron was the founder Kenneth Lay, his successor
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...
Investors and the media once considered Enron to be the company of the future. The company had detailed code of ethics and powerful front men like Kenneth Lay, who is the son of a Baptist minister and whose own son was studying to enter the ministry (Flynt 1). Unfortunately the Enron board waived the company’s own ethic code requirements to allow the company’s Chief Financial Officer to serve as a general partner for the partnership that Enron was using as a conduit for much of its business. They also allowed discrepancies of millions of dollars. It was not until whistleblower Sherron S. Watkins stepped forward that the deceit began to unravel. Enron finally declared bankruptcy on December 2, 2001, leaving employees with out jobs or money.
Enron was in trouble because of something that almost every major corporation during this time was guilty of. They inflated their profits. Things weren't looking good for them at the end of the 2001-year, so they made a common move and they restated their profits for the past four years. If this had worked to their like they could have gotten away with hiding millions of dollars in debt. That completely admitted that they had inflated their profits by hiding debt in confusing partner agreements. Enron could not deal with their debt so they did the only thing that was left to do, they filed for chapter 11 bankruptcy. This went down as one of the largest companies to file for bankruptcy in the history of the United States. In just three months their share price dropped from $95 to below $1.
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.
Enron and Arthur Anderson were both giants in their own industry. Enron, a Texas based company in the energy trading business, was expanding rapidly in both domestic and global markets. Arthur Anderson, LLC. (Anderson), based out of Chicago, was well established as one of the big five accounting firms. But the means by which they achieved this status became questionable and eventually contributed to their demise. Enron used what if often referred to as “creative” accounting methods, this resulted in them posting record breaking earnings. Anderson, who earned substantial audit and consultation fees from Enron, failed to comply with the auditing standards required in their line of work. Investigations and reports have resulted in finger pointing and placing blame, but both companies contributed to one of the most notorious accounting scandals in history. There remains much speculation as to what steps could and should have been taken to protect innocent victims and numerous investors from experiencing the enormous loses that resulted from this scandal.
“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.
A month after the twin towers fell in New York City the nation's focus was shifted to the Enron scandal. Kenneth Lay and Jeffery Skilling were names in the press almost every day. Enron filed bankruptcy and thousands lost their jobs and pensions. Another company involved in the scandal was Arthur Andersen, an accounting firm; Enron was their client. Arthur Andersen continued to perform bad audits even after a warning from SEC. If Arthur Andersen employees had been ethical, after the warning, the Enron Scandal would not have had led to the conviction and dissolution of the Arthur Andersen accounting firm.
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.
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).
An alternative action the company could have taken was to admit the truth and try to find a solution to that one problem instead of committing more illegal acts to add to the pile. They also could have stopped and brainstormed legal ideas to make more money before all of this started. Enron needed to prioritize the most important factors to its company and to this problem. According to the Deontology method, ethical behavior can be measured to an absolute set of standards.