Business Ethics -Enron

In: Business and Management

Submitted By Fashionfix13
Words 885
Pages 4
How did the corporate culture of Enron contribute to its bankruptcy?

The corporate Culture at Enron could have contributed to its bankruptcy in many ways. Its corporate culture supported unethical behavior without question for as long as the behavior resulted in monetary gain for the company. It was describe as having a culture of arrogance that led people to believe that they could handle increasingly greater risk without encountering any danger. Its culture did little to promote the values of respect and integrity it instead rewarded ‘innovation’ and punished employees deemed week. The performance evaluation process for employees that was dubbed “rank and yank” utilized peer evaluations, and each of the company’s divisions was forced to fire the lowest ranking employees. This created cut-throat competition not only against Enron’s external competitors but also within the organization. It pitched employees against each other. The internal rivalry created in turn contributed to less communication between operations for fears of being fired. The “survival for the fittest” atmosphere reached the point where illegal activity was deemed necessary to stay on top of the game. Enron’s compensation plans also seemed less concerned with generating profits for shareholders than with enriching officer wealth. Its culture encouraged flaunting the rules and even breaking them. Each Enron division and business unit was kept separate from the others and as a result very few people in the organization had the big picture perspective of the company’s operations. All these aspects of the corporate culture at Enron contributed separately to its eventual bankruptcy

Did Enron’s bankers, auditors and attorneys contribute to Enron’s demise? if so, how?

Yes, the bankers, auditors and attorneys have contributed to Enron’s demise. This reason for this is because they took sides…...

Similar Documents

Business Failure in Enron

...Business Failure in Enron and The Organizational Behavior Theories That Explain the Company’s Failure Name: Institutional Affiliation   Enron Corporation was one of the world’s top electricity corporations that underwent a financial indignity, which involved Enron and its bookkeeping company. The scandal comprised of the detection of unbalanced accounting techniques, which occurred through the 1990s. This resulted in Enron filing for insolvency in December of 2001 (Thomas, 2002). The aim of this paper is to define how organizational behavior theories could have anticipated or illuminated Enron’s failures. Organizational behavior, is described as an area of study that explores the influence that groups, individuals, and structure have on performance inside the organizations for the aim of applying such information toward refining an organizations efficiency; precisely organizational behavior concentrates on how to increase output; decrease absenteeism, turnover and unusual workplace conduct; and raise organizational loyalty behavior and job fulfillment (Robbins & Judge, 2007). The key players of any business are senior management, board of directors, in-house auditors and external auditors. In case of Enron, all the stakeholders were unsuccessful in playing their parts. Enron failure was mainly because of Enron’s managerial team trying to make an enterprise which would raise riches amongst their owners. Nevertheless, when it was exposed that Enron’s stock prices were......

Words: 833 - Pages: 4

Enron Ethics Case Study

...Summary Enron Corporation is an energy trading, natural gas, and electric utilities company based in Houston, Texas. Formed in 1931, it was originally known as Northern Natural Gas Company. In 1985, Enron was formed by Kenneth Lay after the merger of Houston natural Gas Company and Inter North (Nebraska Pipeline Company). Fortune magazine named Enron “America’s most innovative company for 6 consecutive years. But all that came crashing down in a very bad scandal better known as the Enron Scandal, and it also led to the dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world. Enron’s stock price went down to pennies from over $90. It is ever the most famous company in the world, but it also is one of companies which fell down too fast. The aim of this paper is to analyze how and why the Enron Scandal took place, how the energy giant suddenly collapsed and eventually filed for bankruptcy. I. Special Purpose Entities Enron created partnerships within their own organization which led to them creating new financial instruments, called SPE’s which was used to falsify the accounting. Enron used SPE’s such as LJM Cayman LP, LJM2 Co-Investment LP, and Raptor vehicles, which is designed in part to hedge an Enron investment in a bankrupt broadband company Rhythm NetConnections, to “increase leverage and ROA without having to report debt on its balance sheet” (Journal of Accountancy, 2002). Enron entered into a series of......

Words: 1936 - Pages: 8

Business Failure: Enron

...Managerial Organization (Option 1) University of Phoenix Organizational Leadership Patricia Caracena June 10, 2013 How did Enron a multibillion-dollar energy company arrive at a state of non-existence?  Was it due to the lack of leadership and ethical managing or the whole organizational structure? Nevertheless, the collapse of Enron shed a whole new light on the industry of how one-minute they are the leader of the pack and the next just a remembrance of what was complete. Problems that plagued Enron were the lack of management possessing values, ethics, structure, leadership, and integrity to oversea the company. After Enron, government agencies begin to explore what caused the company to plummet. With the discovery of the uncovered risks, which show specific organizational behavior theories were unseen, the prediction was that this ultimately caused the downhill demise. Problems faced by Enron arose from the CEO and other management not acting in a manner that was competent in terms of knowing how to organize properly lead, and control the company. Enron consisted of some of the best executives with business backgrounds and employment records that showed them as being flawless. With this combined experience the entire team lacked the ethical approach of accountability on the level of financial insight and daily business processes. “Enron was undone by shaky accounting, too much borrowed money and an unwillingness to provide information to investors who grew to doubt...

Words: 907 - Pages: 4

Enron Ethics Issues

...The activities of the leadership of Enron and its Board of Directors is a virtual how to on how unethical decisions can and will eventually bring a company to the brink of collapse. The short term rewards of unethical activity can be quickly overcome by the destructive force of investigations and market swings. How greed and lack of oversight can cause the disruption of the livelihoods of employees not directly involved with the unethical behavior. We will examine the events leading up to the bankruptcy of Enron as well as the resulting legislation put into place because of the misdoings of Enron and other companies. Before Enron became one of the top ten largest companies in the United States it was formed by the merger of Northern Natural Gas and Houston Natural Gas. Kenneth Lay was the original CEO of Houston Natural Gas and took the reins of Enron 6 months after the merger in 1985. In early 1990, Andrew Fastow, who became the Chief Financial Officer and Jeffrey Skilling, the current head of Finance at Enron, joined forces. This was the beginning of the creative accounting practices utilized by Enron during Fastow’s tenure. Using loopholes in Generally Acceptable Accounting Procedures, these individuals were able to cook the books for Enron for 4-6 years and thus sealed the fate for the employees. From the Board of Directors down to the mailroom employees. To come up with a company’s bottom line you take the liabilities and subtract them from the assets...

Words: 1839 - Pages: 8

Business Ethics

...The Problem with Business Thesis: In many businesses today ethical decisions take a backseat to profit, I believe businesses should follow a set of ethical standards and not focus solely on profit for four reasons: (1) to have respect for human dignity, (2) private lives and business lives cannot be separated, (3) ethical decisions can lead to more profit, and (4) unethical decisions can lead to serious consequences for the people executing them. There are many decisions a business must make on a day-to-day basis. Many of these decisions will affect not only the business itself, but also every stakeholder in that business. Many times business will not take into account the number of people being affected. Businesses should not be so vital that they do not need to follow a set of ethical standards. Profit can be seen as the universal motivator for the majority of businesses today and focusing solely on profit can cause a business to lose its ethical standards. The loss of these standards can cause a trail of destruction caused by a business and cause it to lose a great amount of respect. There are countless examples of destruction caused by businesses like the BP oil spill or IBM supplying technology to Nazi Germany. There are four main reasons why ethical standards for businesses should be instilled. These are (1) to have respect for human dignity, (2) private lives and business lives cannot be separated, (3) ethical decisions can lead to more profit, and (4) unethical......

Words: 2524 - Pages: 11

Enron Ethics

...measured by the traditions they build and the way they manage all their relationships with shareholders, employees, and the communities they live and work in. Enron went bankrupt and disappeared over 10 years ago but the impact it has made on ethical standards have never faded. Thousands of people lost their retirement savings, and the energy industry was greatly affected by the downfall of Enron. The collapse of Enron is now used in many textbooks and research papers as an example of the importance of an organization’s behaviors an how much of impact unethical acts can have from top management all the way to new hires. Company leaders do not always do the right thing, act as positive influencers, or lead the company to do the best thing for all its stakeholders. The actions of the company executives, the culture established, the employee motivations employed, and the company structure all provide signals of whether a company is ethically sound. Enron’s demise sets the stage for a good learning experience for all businesses. Enron is the poster child for lacking in characteristics such as honesty and decency. “Ethics and integrity are at the core of sustainable long term success,” says Richard Rudden, managing partner at Target Rock Advisors in New York State. “Without them, no strategy can work and, as Enron has demonstrated, enterprises will fail. That’s despite having some of the ‘smartest’ guys in the room.” Research shows that corporate codes are......

Words: 1780 - Pages: 8

Business Ethics

...BUSINESS ETHICS 'COLLECTIVE ACTION PROBLEMS' IN PARTICULAR HOW MUCH RESPONSIBILITY DOES AN INDIVIDUAL MANAGER HAVE FOR THE ETHICAL CULTURE OF HIS/HER ORGANISATION? Ram Visvanathan Business Ethics May 28, 2014   Introduction. Ethics is very important for the prosperity of any organization. Every employee or stakeholder of an organization has got an important role to play in nurturing an ethical culture in an organization. This research paper discusses the level of responsibility that an individual manager has in the ethical culture of his or her organization. This is done with close attention to academic journals and research. The paper will derive its arguments from veteran theories like the Utilitarian and the Kantian theories. The paper will also relate its discussions with the case study about Enron a USA company that collapsed as a result of unethical behavior in the management.  Some of the components that will be highlighted in the paper include; the importance of an ethical culture in an organization, the dangers of lack of ethics in an organization and the strategies that can be used to promote ethics in an organization. Justification of the research. The study of the role of individual managers in the ethical culture of an organization is a justified venture. This is because of the increased calls for ethical behaviors in organizations. The expectations of the staff and the society at large on ethical behaviors have increased......

Words: 5413 - Pages: 22

Ethics in Business

... Ethics in business: Author: Institution: Introduction. Ethics have been defines as the discipline that differentiates between what is good from what is bad. Ethics are a set of moral principle or value. Ethics assist individuals to make moral decisions when faced with any kind of situation. In business, ethics assist individuals in applying ethical considerations when making any decisions. Ethics regarding the carrying on of business have been described as principles and standards of behavior that are expected of individuals in business. There are various philosophical approaches to decision making in business. One of the most popular philosophical approach to ethics in business is the consequentialist approach. According to this school of thought, a decision ought to be analyzed to ensure that the benefits of making that particular decision outweigh the possible harm that can be occasioned by that decision. According to this theory, the only variables under considerations are the cost benefits involved as well as the level of harm that is likely to be caused by a particular decision. The deontological school on the other hand addresses issues which are related to duties, rights and considerations of justice using standards that are rooted on morality. There are various problems associated with this philosophical school of thought since it advocated for a strict observance of ethical behavior. One of the major problems is the conflict between the ethical duties owed to......

Words: 819 - Pages: 4

Business Ethic

...1. Identify the nuggets from the two-day sessions of Business Ethics class and explain how would you apply those nuggets in your work place. ANSWER: Nuggets from the lecture Ethics defined as the study of right or wrong and as broadly as the general inquiry into what is good. Ethics examines the right or wrong within the context of moral duty. Business ethics is a form of applied ethic in business activity that examines ethical principle and moral or ethical problem that may occurred on business environment. It is applies to all business activity either to the conduct of individual or entire organization. Some business may have same issue related to the business ethic such as problem of product quality, transparency of the financial statement, environmental issues, human right, workplace quality and safety issue etc. In business a company shall create a regulation and code that will regulate the daily life and how business should perform in ethical way. Those we call it Code of Business ethic and Conduct. Code of business ethic and conduct for the company is very important to set up and regulate the life of company. It’s collection of principle in term how they believe and aims to live by. It is also reflected the corporate culture and its vision and mission of the company. How the code of conduct applied in Chevron which they call it “The Chevron Way”. The Chevron code of conduct built in line with their company’s vision and mission. Integrity is one of......

Words: 1419 - Pages: 6

Ethics on Enron

...Ethics is the branch of study dealing with what is the proper course of life in human’s life or throughout society. It is the study of right and wrong in human endeavors. It is the value and pursue we categorize. It is regarding do we pursue for self interest or for the greater cause for society. One main culprit for Enron scandal was Arthur Anderson. It had served as Enron’s outside auditor since 1985. Not only did Anderson do external audits it also provided Enron internal auditing and consulting services. Anderson auditors helped Enron hides its earning manipulation. Arthur Anderson falsifying financial condition of the company and never disclosed it to the public. Anderson did all kinds of services for Enron such as external auditing, internal auditing and consulting services. This not only violates accounting services but because there are conflicts of interest among the services provided by Anderson. What we see from Enron case is that some people performed ethically and while others did not. Margaret Cecani who blew the whistle regarding the scandal Enron’s manipulation of the numbers in its finical report and the data. But, when we look at Kenneth lay the founder and the CEO of the company. Under his leadership he created a company with dishonest and lack of integrity among his employees and throughout company. Lay was not only caused investors to loose billions of dollars but he was also involved in fraud. One case was that telling his employees hard earned......

Words: 572 - Pages: 3

The Ethics of Enron

...The Ethics of Enron: A Corporate Disaster Racheal D. Smith Salem International University The Ethics of Enron: A Corporate Disaster Ethics, as stated by Dawn D. Bennett-Alexander and Linda F. Harrison in The Legal, Ethical & Regulatory Environment of Business in a Diverse Society, are considered subjective laws as well as a how-to-guide for businesses in how they conduct themselves with their suppliers, customers, employees, and anyone else they do business with (2012). It is not enough to know how to run and conduct business, it is also important that good judgment, situational experience and common sense be used in order to be successful and remain that way. There have been companies in the past who have not exercised good ethics and have paid the price for their folly. It was not only the CEO’s and the upper echelon who suffered, though they may have received the brunt of it, but also those employed by the company. This is true in the case of Enron. Enron was a company who “marketed electricity and natural gas, delivered energy and other physical commodities, and provided financial and risk management services to customers around the world (Enron Fast Facts, 2015).” Enron was formed in July of 1995, after the merger between Houston Natural Gas and InterNorth out of Omaha with the help of Kenneth Lay and became the sixth largest company in the world that provided energy (Enron Fast Facts, 2015). It was due to Ken’s ambition to turn the stable business......

Words: 1414 - Pages: 6

Ethics and Business

...Ethics and Business In this paper we will review how ethics plays a role in business by examining a memo that was written between two Enron executives. Enron was an energies and commodities corporation who is most known for their insider trading scandal in the early 2000’s that resulted in bankruptcy. They were one of the five largest audit and accounting partnerships in the world and their financial fraud caused clients and shareholders to lose millions of dollars. In this memo Sherron Watkins, an Enron vice president addresses CEO Kenneth Lay on rumors of dirty financial deals and illegal financial practices. What information would we want to know before making a judgement about Watkins? In the memo Sherron Watkins tells Kenneth Lay that she is nervous that their company will implode in a wave of accounting errors. She asks if there is a way to undo the deals they’ve made. This commentary may reveal that she has had knowledge of these actions and may have even had the knowledge for some time. How involved is Watkins in this scandal? Has her actions or decisions whether deliberately or in negligence contributed in any way to the financial dishonesty of the company? This situation clearly raises ethical issues. It appears that Sherron Watkins is more concerned with the repercussions that could come from getting caught than she is with the questionable business practices that her corporation is involved in. In the memo Sherron does not raise question on the social......

Words: 795 - Pages: 4

Business Ethics

...Current Ethical Issue in Business Kathryn Sumner PHL/323 November 30, 2015 Chuck Thompson Current Ethical Issue in Business Enron had one of the biggest ethical scandals of the 21st century. The company’s unethical practices was the downfall of the company. Let’s start with a little bit of history about the company. Enron was formed by the merging of two different companies, Houston Natural Gas and InterNorth in 1985. Kenneth Lay was the chairman and Chief Executive Officer of Enron. Lay hired Jeffery Skilling and he developed a staff of executives who used accounting loopholes, special purpose entities, and poor financial reporting to hide billions of dollars in debt from deals and projects that failed (, 2015). The impact to the company is very detailed and will be discussed throughout this paper. At first Enron was not financially stable for many years but it was able to survive. After the deregulation of electrical power markets in 1988 Enron quickly became a thriving company subsequently it went from an energy delivery to energy broker. With deregulation this allowed Enron to profit from the exchange and generating income from buying and selling companies. Over time the contracts became more diverse and more multifaceted. Enron’s services evolved and so did the culture of the company (Sims & Brinkmann, 2003). Skilling pushed more aggressively and he made Enron one of the biggest wholesaler of gas and electricity. They made $27 billion dollars......

Words: 1851 - Pages: 8

Post-Enron Era Ethics

...MGT320 Portfolio Project Post-Enron Era Ethics The time for change is now! CEO’s must continue to be held accountable for the accuracy of their financial statements, and the performance of their company. To assure the accuracy of a publicly traded company’s financial status reporting, an additional requirement of an outside industry experienced auditing firm is needed, as well as performance based pay contracts for publically traded companies’ officers. The goal is simple, change the mindset of CEO’s, boards of directors (BOD’s), and shareholders by teaching them the fundamentals of business ethics. To obtain our goal, we must first have a basic understanding of existing legislation and the willingness to create new legislation for the betterment of America. To begin, a discussion in regards to the Sarbanes-Oxley Act is important for the purposes of an overview of existing legislation. In the past the US government has relied on the states to monitor and enforce the rules of auditors. Typically public accountants were licensed by the states to audit corporate financials; however the states had very little, if any, money to provide the necessary funds for enforcement. “Public accountants were licensed by the states, but states devote few resources to supervising auditors; federal regulation of auditing was light; and no federal agency supervised auditors. A Public Oversight Board for auditors was created in 1978, but it was dominated by accountants, funded by the audit...

Words: 2137 - Pages: 9

Ethics of Enron

...Ethics Enron's culture during their heyday encouraged an entrepreneurial spirit along with a “loose tight” management style that has been highlighted in the media and the Darden CD as being part of their success (Darden CD). However, according to Hatcher (2003), Enron had a culture of “anything goes as long as it makes money”. For example, in a thesis written by Boje, Alder, and Black, the authors claim that Enron used theatre to influence how decision makers accurately or inaccurately interpreted the information presented. As part of this "anything goes culture" between 1998 and 2001 Enron set up a fake Hollywood type trading floor on the 6th floor of Enron corporate headquarters using simulated statistics and their employees pretending to be "energy service traders to influence investors, regulators and employees (Boje, 2004). Although it maximized shareholder equity one would consider this behavior unethical. What about Enron's ethics program? Enron’s Code of Ethics was published in 2000, and even included a forward written by its chairman Kenneth L. Lay, in which he states “Enron’s reputation finally depends on its people, on you and me.” However, even with this senior level "endorsement", Enron’s Code of Ethics, their policies and procedures and the associated training were not enough to circumvent the wanton fraud at Enron that resulted in the largest bankruptcy in American history (Wilkinson, 2005). Why did Enron’s ethics policy fail? One of the reasons that......

Words: 611 - Pages: 3

No Game No Life | RUIMIO Espejo de Maquillaje LED Luz Cosmético 7X Aumento Ajustable con Ventosa | El Objetivo