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Enron: A Good Example Of Bad Ethics

1306 words - 5 pages

It is being called the greatest business calamity in American history. Enron, the seventh largest Fortune 500 company in the nation, [1] disintegrated in a matter of days. Countless executives, employees, and retirees watched helplessly as their fortunes disappeared along with Enron.Enron, a pipeline company in Houston, was founded in 1985. It profited by promising to deliver gas to utilities or businesses at a fair market price. That changed with the deregulation of electrical power markets. Under the direction of former chairman, Kenneth L. Lay, Enron expanded into an energy broker, trading electricity and other commodities. [2]. It generated revenues of $101 billion in the year 2000. It markets electricity and natural gas, delivers energy and other physical commodities, and provides financial and risk management services to customers around the world. [3].What happened at Enron was fundamentally a departure from basic business ethics. Enron falsely recorded positive gains each quarter, without considering the effects this propaganda would have on itself and on its constituents. To enrich themselves, Enron's executives lied to shareholders and cooked the books to produce fake profits, ignoring the company's long-term financial problems. In the last year, Enron executives made more than $100 million by exercising stock options and selling shares, while at the same time, the allegedly false numbers were driving up the value of that stock. As the crisis mounted, stocks once worth as much as $90 a share plummeted to near worthlessness, and employees, with the exception of top executives, were prevented from selling it. [4] There are thousands of current Enron employees who are going to suffer greatly from this debacle. They will likely lose their jobs and their retirement savings. What's worse, it goes deeper than that. There are many other investors who will suffer. Regrettably, it counts for more than dollars. Misconceptions are flourishing, particularly toward large organizations. A writer in The New York Times quotes a colleague's impression of any big organization's vision and values statement as, "We will strive to make as much money as we can without going to prison. " [2]Several events led to the downfall of Enron. Its services became more complex and its stock value soared. It fashioned partnerships that allowed managers to move debt off the books. Some partnerships' losses would have to be paid for in 2003 out of Enron stock or cash. In October, Enron announced a $638 million loss for the third quarter, and Wall Street reduced the value of stockholders' equity by $1.2 billion. Enron announced that it had overstated earnings over the past four years by $586 million and that it was responsible for up to $3 billion in obligations to various partnerships. Lenders swiftly downgraded Enron's debt to junk-bond status and a $23 billion merger offer from rival Dynegy was dropped. [2]To understand why it's important to have ethics policies, we need...

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