Enron - Ethical Dilemma Essay

Words: 1139
Pages: 5

Ethical decision making: A dilemma Ethical issues have greatly transformed in our lives since the great Enron, Xerox and other huge corporations proposed big profits showing earnings of billions of dollars and yet in reality facing bankruptcy. These corporations faced great trouble with the federals and state for manipulating financial statements. But not only corporations can be blamed on this, accounting firms were involved in this as much as the corporations were. With the business stand point, ethics comprises of principles and standards that guide behavior. Investors, traders, customers, and legal system determine whether a specific action is ethical or unethical. Ethical issue is a vast subject, but we will look at the niche …show more content…
Enron had established the SPEs/ partnerships to move assets and debit off its balance sheet when it sold assets. Although these practices produced a very favorable financial picture, outside observers believed they might constitute fraudulent financial reporting because they did not accurately represent the company’s true financial condition. An example on this would be, a company build its own plant or office building, sells it to a group of investors, and then leases back the property for its business purposes but still maintains some ownership. SPEs can be assets to its parent company that helps facilitate daily business operations. These both practices made Enron file bankruptcy in December 2001.They faced twenty two thousand claims totaling about $400 billion. All the premier investment banks had to face enormous losses while making investments in Enron but few investors were involved in the fraudulent activities with Enron. Basically, Enron was losing money in cash basis but yet showing big profits in the financial statements. At the end, all these unethical transactions made millions of dollars for CEO and CFO personally and bonuses including $55 million but huge losses to employees, shareholders and investors. Questions which rise in situations like this is why executives have made unethical conducts. After the bankruptcy of Enron, the federal regulatory