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The Ethical Collapse of Enron

The Ethical Collapse
of Enron

 

            What
happens when a company over looks ethical values to their own benefit? One of
too many possible example is Enron. A massive corporation that lied, stole,
manipulated,  and deceived to the very
end to expand its empire. Here we are going to look at what happens when ethics
are taken out of the equation. By the end you are going to be able to

·        
identify corporate responsibility

·        
identify  insider trading

·        
identify unethical accounting practices

·        
Identify what is and when to Whistle blow

The Environment            

                The
first look at where the company unethical practice have been routed through
their "questionable" hiring practices. After going through the hoop
for their jobs employees would be reviewed semi-annually and then if scored
poorly they would be terminated. With the constant threat of losing their jobs,
employee would feel uneasy saying anything that would hurt the company. The
environment may have promoted productivity, but created an ill atmosphere that
would also protect Enron against its own employees and whistle-blowing(To
report or illegal or unethical activities in the company and is only done after
the supervisors have been notified and if it will hurt the public). Which led
to many  employee to not speak out when
the company asked them to shred documents.
(Lawrence, Weber, and Post, 2005
)

 

Finding the loopholes

                With
the companies growing ventures they ran into a problem. They started out with a
light asset strategy, but with all these growing industries they wanted to
become a part of they need funding for it. With all the capital they spend they
were over 10 billion in debt. They couldn’t get contracts in the company looks
financially unsound. Also they worried with all 
this debt that they would not have people invest in the company. They
came up with a solution by hiring Andrew S. Fastow who became the Chief
Financial Officer (CFO).  They started
dealing many Special Purpose Entities (SPEs). They used these SPEs to make
Enron look better than what it was with very complicated accounting maneuvers
to move their debt off their books and onto these SPEs. With the concept of
have a financial solid company they continued with contracts and more loans to
pay for their expanding products and services.
(Lawrence, Weber, and Post, 2005
)

                Once
their liabilities were off then they started to improve their revenues. They
started to use their projected earnings where the current earnings would go.
The Financial Accounting Standards Board (FASB) allowed this practice with not
nearly enough regulations. Thus Enron altered their earnings on the books.
Also, the company would buy assets right before the quarters ended making  it seem that company was doing better than it
was.  (Lawrence,
Weber, and Post, 2005
)

Watching their own backs

                What of
the regulations set to stop this? Enron had that covered too. The auditors and
board of directors were supposed to be in charge of watching out and reporting
any unethical practices. They met five times a year and were oddly paid very
well for their jobs. Bribery was another tool in the companies arsenal of tools
used to silence members and to keep them from snooping. During the years where
Ley and Skilling felt uneasy they sold their stock knowing that they were
eventually going to hit a wall. This inside trading is illegal it stealing from
the public and shareholder. They made everything looking  better than it really was and people hit hard
for it. (Lawrence, Weber, and Post, 2005)

               

               

The aftermath

                In the
video we see people retirement was completely gone, It was all wrapped up in
the company's stock which plummeted when they went bankrupt. Stockholders lost
nearly 11 billion when Enron filed for bankruptcy. The video is a reminder of
the action of few affect so many and that we must make better choices to ensure
that this will not happen again.  (Anonymous , 2010)

 http://www.metacafe.com/watch/4369083/fall_of_enron/

 

 Bibliography

 

-Lawrence, A. , Weber,
J. , & Post, J. (2005).Collapse enron. (11th ed., pp. 408-420). New
York, NY: McGraw-Hill.

-Anonymous , Initials.
(2010, January 23).Enron scandal.

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