Enron's Business Ethics Failure

Content

1. Overview ............................................................................................3

2. The Fall of Enron ...............................................................................4

3. Enron's ethical dilemmas ..................................................................6

4. Conslucions .......................................................................................7

5. Bibliography ......................................................................................8

1. Overview

The goal of this report is to analyze business ethics in the context of the Enron scandal.

Enron scandal became a classical example of how a major disregard for ethics and law occurred. It becomes obvious that the institution of business education has not paid a sufficient amount of attention in ethical guidance in executive management, before Enron's bankruptcy.

Multiple business principles are involved in the rise of fall of Enron. In order to succeed in today's evolving global market, organizations must adopt business principles and practices of knowledge sharing, shareholder protection and ethical business practices.

Currently, business ethics are considered to be very important, but there are still many organizations that do not engage in ethical behavior, not toward their employees and not toward other companies they work with, such as distributors and suppliers.

The behavior of Enron represents the need of organizations to evaluate their business practices from the bottom up, in order to design an organizational culture as well as organize the management team that will be committed to the benefit of all stakeholders.

This report will look at how Enron failed in various business practices including organizational development, business ethics, organizational culture. The report will specify how traditional business ethic codes were violated and lead the organization to bankruptcy.

As a result of the Enron scandal, corporate leaders, employees and the companies that represented Enron (Arthur Andersen) were affected, as well as the public. Enron destroyed the public's view that business operates for the good of the people, and promoted that honesty and integrity do not mean anything in business relationships.

2. The Fall of Enron

Enron became one of the largest natural gas and energy trading companies in the world.

During the 90's Enron was considered as innovative company within the global business market. Enron was known for its unique and innovative technologies and unique approach to trading in the world of e-commerce.

However, "Enron's success was short lived once officials discovered the company misrepresented itself by falsifying income statements and lying about the value of equity the company shared" (NRP, 2005). Enron collapsed, and the collapse was huge. Enron actually suffered from large debts and losses while the accounting firm Arthur Anderson helped the company to hide those losses. In 2001 the company was announced to be in a process of bankruptcy. The Enron scandal shocked most of the nation, and seriously damaged the financial life of many individuals who worked for the company. A lot of these people were nearing retirement age and everything they had worked for all of their lives was lost.

The company began to collapse by admitting that there had been falsified bookkeeping, and that the profits were actually balanced out by loss and charges that were not recorded. The stock that was selling at $90 per share two years before the collapse was suddenly worth 26 cents per share. Because of this, the company decided to betray its employees, the pensions that these people had disappeared because most of them were invested in Enron stock.

Enron was not really making profits. What they did was create the illusion that they were making a profit. When this became obvious during the investigation, it was clear that this could not have been done without the help of Enron's accountants. Eventually, the problems with Enron also brought down the Arthur Anderson accounting company. This was caused when an investigation in Enron discovered that the auditing and accounting fraud was so large that it was impossible that the Arthur Anderson company could have been unaware of it. Arthur Andersen definitely acted unethically by hiding documents and information from the public.

The consequences were brutal for Arthur Anderson and for Enron, but they were even more brutal for the employees that had lost their jobs and everything that they had. They were the people that were hurt the most by the unfair and dishonest practices that Enron and Arthur Anderson engaged in.

Greed is one of the reasons why Enron executives failed in telling the truth. Most large companies are under great pressure to perform, they are worried about profits, and they are worried about what will happen to their stocks if they will be unable to meet the expectations of them. Even though these arguments help to understand why companies sometimes use improper moral judgment, it still does not excuse their incorrect decisions or unethical actions.

Business ethics is becoming an increasingly important and significant part of successful business negotiations in the global business market. Even though, Enron's officials failed in recognizing the importance of business ethics, more and more modern organizations have not. Currently, a lot of organizations are recognizing and emphasizing the importance of social responsibility when engaging in business relationships. Hopefully this recognition will help to prevent another business disaster such as occurred in Enron.

Businesses must want to make ethical choices for the business ethics in order to grow strong. Anyone can hang a code of ethics on the wall, but following it is where the real work starts, and businesses that do not follow it are likely to end