Enron Ethics Issues

In: Business and Management

Submitted By quandoflu
Words 1839
Pages 8
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. If you are in the positive, your business is operating successfully, if you are in the negative, you have some work to do. Enron enlisted a practice to remove as much of its liabilities as possible from their bottom line. To do this, Fastow began to set up outside limited liability special purpose entities. The liabilities from Enron would be transferred to these outside entities. In doing…...

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