Identify an event or series of events that occurred in the financial marketplace falling within the realm of Financial Management, Financial Institutions and Markets, or Investments that raise significant ethical questions. Analyze the events, public policy responses and their impact on the financial markets and economy at large.
Suppose you are the CEO of a well respected, multi-million dollar energy company. You stand at the forefront of innovation and you are world-renowned for your pioneering efforts in the energy industry. However, due to a series of poor financial decisions, your company is on the verge of bankruptcy. You realize that in order to protect your own interests and investments, desperate measures need to be taken. Just exactly how much are you willing to sacrifice? Are you willing to risk everything? Imagine your company is Enron. Imagine your name is Ken Lay.
Many remember and know of Enron not because of its reputation but because this company filed one of the largest bankruptcies to ever occur in American history. Enron began its reign as a powerhouse company when congress passed legislation that deregulated the sale of natural gas and electricity which allowed Enron to excel among companies in this field. This increased Enron’s stock price up to $90 per share and made it appear to be one of the best companies for stockholders to invest their money into. Enron then decided to create offshore accounts commonly referred to as special purpose entities that would hinder any losses that the company was incurring and also deter taxes since international territories have different laws, and would show how much profit the company was making.
It was then discovered that these offshore companies were solemnly created and used to hide the tremendous losses that the company was suffering while they were claiming to be making billions of dollars in profit. The found out the truth about what was really happening to the tremendously “profitable” company and what the executives were really doing behind close doors. While stockholders believed that their stock with Enron was increasing as time went on, in actuality the total opposite was happening and they were losing money instead. Many stockholders because of the “profitability” of the stock, had put every cent they had into the company that even included retirement funds, to wake up the next day and have it depleted.
This can all be attributed to the unethical practices that were performed by the executives at Enron. It was clear that the company was losing money and that the stockholders should be made aware of these loses but instead they decided to cover up what was happening. This event mislead people into believing that everything was going smoothly and there was nothing to worry about. The executives knew of what was to come in the future and began to sell stocks based on insider information making them richer and not caring that the stockholders were going to lose...