Essay on Ethics and Enron

Submitted By NNHHMM
Words: 988
Pages: 4

Ethical issues: Enron’s collapse In the past, Enron was one of the world's major electricity, natural gas, communication, services, and paper companies. It is a truth that Enron was one of the America's most innovative companies in the past six consecutive years. Until 2001, it claimed that it had nearly $101 billion revenues. However, Enron Corporation announced its collapse on December 2, 2001. To be honest, it was a biggest bankruptcy in U.S. history. In the public, most of people think that Enron's collapse should be attributed to the big illegal ethical issues. The biggest problem in company’s collapse are dishonesty and fraudulent operating behaviors, so gradually, Enron lost its positive image among the global markets. There were several ethical issues occurred in Enron which hurt and affected Enron’s employees and sustainable operation. The first ethical issue was that Enron encouraged their employees to invest in Enron when the decision-maker knew their company was not in a good condition and their stock was lack of value. The reason why the company couldn’t do well was that the corporate strategies which were required to use illegal ways to increase profits. Also many questionable accounting procedures resulted to company collapse. Unfortunately, the executives made use of their employee’s trust in their management. There is no doubt that their employees were totally hurt in the end, and even the company’s future.
The second ethical issue was that Enron took some measurers to manipulate their earnings. It is a truth that Enron executives required their accountants to make fraudulent financial statements of the company. The Enron CEO allowed their employees to manipulate the earning to make money in any methods, so their stock was lack of value. Once their stock value decreasing fast, the corporation could not avoid the bankruptcy.
The fraudulent behavior brought negative effects to the company’s long run. The investors and their employees could not know the real situation of the company, so after they investing in Enron, they would suffer a big loss in their stock benefits. Also, because of the failure of Enron, more and more corporation that are required to proved high quality and accuracy accounting financial statements. The Sarbanes Oxley must take serious responsibility to audit and monitor these kinds of corporations, so the Sarbanes Oxley work our some new and strict standards to prevent future collapse in U.S. The third ethical issue was that Enron would like to make bribing analysts during its operation. Usually, the managers of Enron encouraged bribing analysts to gain good ratings for Enron that can help their company to attract more and more employees and investors to invest in Enron, because each person wanted to earn more money under Enron’s good ratings. However, the perfect hope of employees and investors was attacked when the company’s financial information disclosed in the public. There was a big gap between real stock price and estimated good ratings,so if all the employees and investor relied on these kinds of bribing analysts,it was impossible for them to avoid a horrible losses, and the collapse of Enron is the certain consequence. The last but not the least ethical issue was that Enron hid losses by moving around business departments. Usually, Enron would like to record their profits for they realizing real earnings, so the only way to make up the difference between estimated profits and real earnings was to hide their losses by moving around business departments. Enron did not report their losses on their transactions at all, and sometimes Enron always tried to move their losses to their other partnerships. However, if the financial business departments, which were their partners, could not hide the losses of Enron, Enron would be pushed to pay out their money at the same time. Hiding losses by moving…