Enron managed to hide millions of dollars in debt and losses through unlawful accounting practices. They hid these losses under their many subsidiaries, often in foreign countries. In event of the fraud being exposed, Enron’s stock crashed but few of the management members managed to bail themselves out by selling the stock when it was still at a high. The investors and employees were left high and dry to face the loss of their investment, pension and retirement amounts. There are many criminal investigations and cases registered for Enron executives.
It was seen as a catastrophe to investors and employees when Enron filed for bankruptcy in December 2001. Their shares dropped from $90 to just pennies. This was the result of many of Enron’s losses that were not reported in the financial statements. The executives faced an ethical dilemma because they knew about the accounts that were hiding losses. The Board The board is the recipient of the shareholders and people and it is their responsibility that correct decisions are made and that the law is being followed.
Workers in Enron were being supported to think out of the box and being creative. They were also allowed to break the rules and increase the value of company although there was no cash generated. Soon, many employees in the company started to use this method to cover and hide losses. Without anyone knowing the company was losing money, they did not have to bear the consequences and responsible for their mistakes. The integrity of Enron was contaminated as a result end up if anyone did mistakes and no one finds out, keep quiet.
Arthur Levitt, former chairman of SEC, stated “I think the Enron scandal is symptomatic of something much broader than Enron. I think it's symptomatic of a breakdown of the ethical values of business over a period of perhaps 20 years, a gradual erosion of business ethics that brought us to an Enron, but might very well bring us to a whole host of Enrons as we move down the road.” This does seem to be a much larger problem then the collapse itself. Their unethical ways cost Americans millions of dollars, and some their life savings. At first it seemed as though the Kenneth Lay let his pride get in the way of admitting his company was going down but the further you get into the details it was all about the money. With their way of doing Market to market account it made them look as though they were making money when in fact they were
1. Enron Corporation was an American energy company in Houston, Texas. In 2001, it was revealed that it reported financial condition was substantial by planned accounting fraud of Enron scandal. The scandal brought into the question of the accounting practices and activities of many corporation in the U.S affected the greater business world. 2.
FRAUD CASE ANALYSIS: ENRON CORPORATION Enron is known as the one of the largest fraud scandals in the United States history. As a result of the investigations, the company was forced to file for bankruptcy in December 2001. In May 2006, Enron’s previous chief executive, Jeffrey Skilling was sentenced to 24 years in jail while the ex-chairman Kenneth Lay died of heart-attack in July 2006. Enron Corporation represented one of the largest fraud scandals in history. As a result of the fraud investigations, the company was required to file for bankruptcy in December 2001.
It is observed by researches and analysts that unethical business and accounting decision has took place in Enron Company especially CFO Jeffrey Skilling and CEO Ken Lay who played major roles in this scandal. Enron involved in business risks like fraud and the company failure happened when it entered into conservative transactions. The problem Enron faced was that they treated their loans as revenues yet it is not shown in the balance sheet, in other words, Enron did not treat them as current liabilities such as accounts payable so they did not show their creditors as liabilities, which had mislead their customers and investors. Because the company had taken the help from others in hiding a large amount of company debt (partnerships with various enterprises), it shows that unethical actions had been carry out. For example, Enron did
Solution:- Capitalism being a vital requirement in our life doesn’t let businesses in defrauding its creditors, spewing pollution, selling the products of the consumers or cheating on taxes of the individuals. The Enron case, in consultation with NASA helped in imposing substantial costs and revenues of the business by resenting the rules and regulations made there under. The two executives of the film helped in running market scams and deregulating larger subsidies for Enron, the skimming of cash into the accounts and the investigation
As a result of the demise of Enron, an issue of sustainability of the shareholder model of corporate governance has come to the forefront of economic debate all over the world. The Enron failure shows a failure of corporate governance where internal control mechanisms were short- circuited by conflicts of interest that enriched some managers at the expense of the shareholders. As a result of that it led to a complete reassessment of ‘shareholder value’ system which became dominant in the United States and United Kingdom in the 1980s and 1990s (Dore, 2006). It is obvious that Enron case has raised important questions relating the shareholder model of corporate governance, showed some noticeable weaknesses, but also declared one significant
In this Enron Scandal ,several moral issues and values are being discussed .The moral issues is the misconduct of code of ethics by management level of a corporation , violation of code of professional ,ethical dilemma that faced by a management level when involved own interest . The first moral issues that discussed in Enron Scandal is misconduct code of ethics by management level of a corporation .In this case ,the mastermind of this scandal is the company CEO , Mr . Kenneth Lay, Mr. Jeffrey Skilling and the company CFO,Mr. Andrew Fastow .The management level of Enron Corporation had misconduct the code of ethics and fail to performing the duties of a corporation which is telling the truth of the situation of a corporation .Instead , they tried try to hide the truth of their financial status and create a false prosperity situation and make the public believe on them in order to support their shares prices . The misconduct of code of ethics by the management level by Enron corporation has led to the another question – The ultimate responsibility of a corporation towards society ?