Answer To: principlesofmanagementenroncase2021 (1) BUSI 311 PRINCIPLES OF MANAGEMENT TERM PAPER INSTRUCTIONS...
Shubham answered on Apr 09 2021
Last Name 11
Name:
Professor:
Course:
Date:
Title: BUSI 311: Principles of Management
Management Ethics and Responsibilities to Their Stakeholders: The Case of Enron
Contents
Introduction 3
Key Management Characters and their Failures 3
Ethical Dilemmas as well as Employees’ Attitude and Behavior in the Company 4
Stakeholders such as Investors, Bankers, Employees, Retirees, Suppliers and Customers 5
Unethical and Illegal Acts were and Fate of CEO, COO as well as CFO 5
Whistle Blower’s Actions and What She Faced since Enron 6
Lessons to Take Away from this Documentary for Corporations 7
Subsequent Law Passed (Sarbanes Oxley) and its Impact on Accounting Profession as well as Business Community 7
Conclusion 8
Works Cited 10
Introduction
Enron was one of the seventh largest companies in United States. It was formed By Kenneth Lay as an outcome of merger between Houston Natural Gas Company and InterNorth Inc. in 1985. Fortune recognized it as one of the innovative businesses. With The help of Jeffrey skilling, it became one of the leading traders of energy derivatives contract. As per Smith, Enron dominated natural gas market and generated huge profits out of it. Andrew Fastow was then recruited who looked after financing and investments of the company. It used SPEs to abuse troubled assets and kept them off the books. Andrew Andersen was auditor and consultant for the company. The management led to the scandal by offsetting losses and showed fake high profits thus declining the reign of a giant.
Key Management Characters and their Failures
Kenneth L. Lay, the chairperson at Enron, was charged for wire fraud, conspiracy, securities fraud and bank fraud as well as making false statements to banks. He along with skilling supported Fastow’s activities. Jeffrey K. Skilling was CEO of Enron was convicted for failure to monitor deals between Enron and its partnership firms. He approved Fastow’s partnerships transactions without checking them.
Andrew S. Fastow the chief financial officer at Enron was primary creator of Enron’s deceptive finances, created many special purpose entities to transfer Enron’s debt to another outside company and get it off from the books. Lea, Fastow’s wife was a former treasurer at Enron was also involved in the fraud. She was found guilty of misdemeanor tax offense in 2004 by failing to report gains earned from Fastow.
Ben. F Gilsan was conceived and he executed several financing schemes, which helped Enron hide its financial losses from outside world. He also committed wire and securities fraud. Arthur Andersen was the auditor of the company and he was paid around $ 5.7 billion for his work of review and approving partnership setups. He shredded the documents of audit, supporting fraudulent accounting thus responsible for fall of Enron. Kenneth D. Rice was consummate salesperson in broadband unit of Enron presented misleading statements about technological capabilities and performance of his division, which resulted in artificial inflation of stock prices.
Ethical Dilemmas as well as Employees’ Attitude and Behavior in the Company
The ethical dilemmas, which were faced by Enron, were accounting scandal in 2001 and SPEs. In accounting scandal mark to market concept was applied, which meant that profits were faked in the books. These profits hide the losses incurred from stock portfolio and offsetting them from the books inflated stock prices. It assigned business losses to special purpose entities and unconsolidated partnerships.
Enron appears to have disguised bank loans as energy derivatives trades to conceal to its indebtedness. Haswell and Evans opined that the statements were confusing for stakeholders and analysts. Enron’s auditor Andre Andersen turned a blind eye following unethical path by ignoring accounting practices followed and destroying audit documents. He was actively involved in deception of finances and supporting people who were creating and benefitting from fraud. The employees’ attitude and behavior was full of greed, intolerance and a reflection of human tragedy.
There is a saying that greater the power, greater the ethical dilemmas and difficulties. As per Mustafa, the leaders of the organization to attain the self-interest, lost trust among stakeholders. They failed morally when it came to serve the people they represent at large....