The Nature of Enron's Business - Essay Sample

Introduction

Enron was one of the most popular energy company in the world that concentrated mostly with natural gases, generation of electricity and transmission. The transmission line was as long as 36000 miles. It generated power independently, conducted oil exploration, and supplied it to the industries and the upcoming market. Enron also focused on other methods of energy production like solar and winds which are renewable sources of energy. Enron expanded its market globally. On the northern part of America, Enron rose to be the largest seller of electricity and natural gases in wholesale. After that encouraging growth in the 1990s, suddenly the company started flopping, and massive loss was encountered. However, shareholders did not know this since the damage was not documented. The accountant gave fake figures. In the year 2001, there was discovery a big financial tricking and the company that was number seven on top 500 was declared bankrupt which and never been witnessed in America.

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Unethical Business and Accounting practices

According to the case study, Lay and Skilling exercised their power mercilessly, and nobody could survive as chairperson in Enron. The position of chairperson experienced hiring and firing. Anybody who seemed to have an issue with Lay or could pose a danger to Lay was sacked immediately. On the other hand, Skilling denied other subordinate a peace of mind and pushed out any corporate competitor. Duplicity by management; the workers in Enron intentionally changed the information for their benefit. The accountants were the most blamed. The executive and board members said they had no idea of the reality. Over-privileged. One time, CEO Loy was living a luxury life, and he could brag openly to his friends. He also borrowed $2 million for their home, and he repaid it with stock. Workers were also given grand Christmas, and they could be taken for a ride with free transport. This was unethical behaviors pulling down the company 2003). Imprudent Behaviors. Enron officers were careless and never reacted to whatever was happening. When the alarm was raised about money fraud, the CEO Lay never took the matter seriously. The managers were also not concerned and left the employees to work on their own thus losing money.

Fundamental Ethical Principles Violated

Self-interest was one of the fundamental ethical principles that were violated. The primary purpose of an auditing firm is to work with the clients to monitor the situations in the business. The consultant Arthur Andersen wanted to see the continued growth of the business. The desire to see the business prosperity made him hide the manipulated data. Judiciary concluded a case and found Andersen auditing firm guilty in obstruction of justice. His accounting license was withdrawn. Professional Competence. Managers were less concerned with what was happening in Enron and employees were left to decide on their own, and more money was lost. By doing so, managers were not professionally competent and could not help the company in its daily operation.

Thoughts and Reactions

It was a good thing for the US bankruptcy court to approve reorganization. By rebranding the company from Enron name to Enron creditors, Recovery Corp (ECRC) brought a new face to the company. Prosecuting the criminals was also an excellent thing to tame money fraud. Conspiracy, trading from within and security fraud were well dealt with. Raising the levels of ethical conduct by Financial Accounting Standard Board (FASB)was also encouraging the move to prevent any future financial crime.