According to Jennings (2006), “All companies experience pressure to maintain solid performance” (p. 17). Marianne Jennings book, The Seven Signs of Ethical Collapse: How to Spot Moral Meltdowns in Companies Before It’s Too Late, centers around seven warning signs or seven common traits pattern to ethical collapse in companies. In her book, Jennings identifies the seven common ethical signs of moral meltdowns in companies to be: (1) pressure to maintain those numbers; (2) fear and silence; (3) young ’uns and a bigger-than-life CEO; (4) weak board of directors; (5) conflicts of interest overlooked or unaddressed; (6) innovation like no other company; and (7) goodness in some areas atones for evil in others (Jennings, 2006, p. 7). This paper will be addressing “Pressure to Maintain Those Numbers.” Jennings describes pressure to maintain those numbers, when managers or employees are pressure to meet “an unreasonable or unrealistic obsession with meeting quantitative goals” (Jennings, 2006, p. 17). Whether we know it or not, each day most of us encounter or pressure by some type of unethical situations. For example, have you ever been tempted to drive faster than the required speed limit. …show more content…
According to International Business, “Andrew Fastow creates Chewco, a partnership, to buy the University of California pension fund 's stake in another joint venture dubbed JEDI, but Chewco doesn 't meet requirements to be kept off Enron 's balance sheet. First step toward similar financial moves to hide debt and inflate profits that fuel Enron 's downfall” (International Business, 2006). Pressure to meet those numbers enable Enron stock prices to reach a high of $90 per share. In October 2001, Enron stock prices dropped causes them to lose $638 million in third quarter and $1.2 billion in shareholder equity (International Business,
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.
It's difficult not to be cynical about how “big business” treats the subject of ethics in today's world. In many corporations, where the only important value is the bottom line, most executives merely give lip service to living and operating their corporations ethically.
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
The Enron Scandal made millions of investors devastated. Enron’s stock prices were at $90.75 per share and fell to $0.61 in one day, which caused them to go bankrupt that day. Enron had experienced tremendous financial losses. The bankruptcy resulted from arrogance, greed from foolishness from the top management all the way down. Enron made lots of mistakes leading to their bankruptcy.
The company has a culture of unquestioning when something wrong surfaced in the company. Take for example the Lockheed documents incident, where the 25000 documents were seen in the company for nearly 3 years before someone voiced his concerns regarding it. This unhealthy culture not only allows unethical practices to prevail, it also hinders company’s growth.
Many organizations have been destroyed or heavily damaged financially and took a hit in terms of reputation, for example, Enron. The word Ethics is derived from a Greek word called Ethos, meaning “The character or values particular to a specific person, people, culture or movement” (The American Heritage Dictionary, 2007, p. 295). Ethics has always played and will continue to play a huge role within the corporate world. Ethics is one of the important topics that are debated at lengths without reaching a conclusion, since there isn’t a right or wrong answer. It’s basically depends on how each individual perceives a particular situation. Over the past few years we have seen very poor unethical business practices by companies like Enron, which has affected many stakeholders. Poor unethical practices affect the society in many ways; employees lose their job, investors lose their money, and the country’s economy gets affected. This leads to people start losing confidence in the economy and the organizations that are being run by the so-called “educated” top executives that had one goal in their minds, personal gain. When Enron entered the scene in the mid-1980s, it was little more than a stodgy energy distribution system. Ten years later, it was a multi-billion dollar corporation, considered the poster child of the “new economy” for its willingness to use technology and the Internet in managing energy. Fifteen years later, the company is filing for bankruptcy on the heels of a massive financial collapse, likely the largest in corporate America’s history. As this paper is being written, the scope of Enron collapse is still being researched, poked and prodded. It will take years to determine what, exactly; the impact of the demise of this energy giant will be both on the industry and the
For a company to be successful ethically, it must go beyond the notion of simple legal compliance and adopt a values-based organizational culture. A corporate code of ethics can be a very valuable and integral part of a company’s culture but I believe that it is not strong enough to stand alone. Thought and care must go into constructing the code of ethics and the implementation of it. Companies need to infuse ethics and integrity throughout their corporate culture as well as into their definition of success. To be successfully ethical, companies must go beyond the notion of simple legal compliance and adopt a values-based organizational culture.
This chapter presents an analysis of what now have become the popular study cases in corporate ethics, the notorious Enron and WorldCom. The chapter also discusses new ethical implications for people holding MBA and CPA degrees. In Chapter Two titled, “Law, Ethics and Society”, in this chapter, Mclemore explores the relationship between law and ethics and describes what people can do if they are being pressured to act unethically. In chapter three titled, “Threats, Risks, and Options”, Mclemore discusses the psychological issues that all those involved may have to face regarding ethical violations and decision-making. The author found a particular quote in this chapter that stood out to her.
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 was able to employ over 20,000 employees across the globe. The recession of 2000 had Enron investors on the short end of the stick. The CEO, Jeff Skilling, had a clever and manipulative way of “hiding the financial losses of the trading business and other operations of the company,” (Investopedia). Skilling used a technique called mark to marketing accounting. The mark to market innovation “led to schemes that were designed to hide the losses and make the company appear to be more profitable than it really was,” (Investopedia). Andrew Fastow was a popular and growing businessman who was promoted to Chief Executive Officer in 1998. Fastow invested in his own companies using Enron as the main investor so he was always able to make a profit. Fastow knew that subsidiaries were losing money, however, he made the company seem as it was in great shape. Fastow and other high officials would hide tremendous amounts of debt from big investors and creditors using “special purpose vehicles,” (Investopedia). “The company, it was revealed, had made about a dozen "partnerships" with companies it had created, and it used those partnerships to hide huge debts and heavy losses on its trading
Many ethical dilemmas are philosophical in nature, an ethical issue can be described as a problem with no clear resolution. In order to solve the issue or dilemma a consensus between the parties involved must be reached. There are several reasons to come to an agreement over an ethical dilemma, it is the basis for all aspects of personal and professional dealings. Each one of us is part of a civilized society and as such it is our responsibility to be rational, honest and loyal in our dealings with others. (Alakavuklar, 2012) states that individuals make decisions for different situations in business life involving various ethical dilemmas. Each time either consciously or unconsciously individuals may follow some ethical approaches
In many circumstances, employees’ behaviors are likely to follow their leader. Enron’s leadership has been extremely influential due to exemplified charismatic. For example, Heffrey Skilling and Kenneth Lay, CFO and one of executive member in Enron, greatly encourage employees to follow their lead. Their incompetence accounting profession directly affects lover level of employees. Eventually, those manipulating accounting activities affect company collapse. Once leadership has done unethical professional accounting behaviors, unethical acts become accepted. Employees have many reasons for remaining quiet. While Enron still have ethical internal rules, when leadership in Enron did not abide and did not provide corresponding example of employees to follow (Prentice 2003, p. 417). Which eventually make Enron’s become one of the largest corporate scandal frauds.
Corporate governances actually illustrate that no entity or agent is immune from fraudulent practices (Arjoon, 2005 p 342-344). Therefore, it is crucial for an organization to have a stable ethically healthy corporate culture, Patagonia is "doing things right" by influencing the actions of the workforce. Through the integration of ethical conduct in an organization, employees see the complexity of making ethical choices; also, it helps the staff understand what an ethical decision entails and how to talk about hard ethical choices and taking responsibility for making moral choices carefully and
Enron has risen to the top by engaging in energy projects worldwide and speculating in oil and gas futures on the world’s commodities markets. They also provided financial support to some presidential candidates and members of the U.S. Congress. However, Enron had a secret. The corporation had created partnerships located in off-shore tax havens. Enron’s stock price fell from $90 to 50 cents a share.
Business nowadays encounter with a lot of moral challenges in today’s global economy. Everyone is thriving to be more successful than their competitors, to make their next profits, to keep their job, to earn a big bonus, or to compete effectively. There exists temptation to bend lines, omit information, and do whatever it takes to get ahead of their competition. Many business employees and executives succumb. Sadly, the theme becomes...