Effect of Unethical Behavior

Topics: Enron, Ethics, Audit Pages: 3 (690 words) Published: December 23, 2012
Effect of Unethical Behavior Article Analysis
W. Jordan Barrick
ACT 291
October 8, 2012
David Fewkes

Effect of Unethical Behavior Article Analysis
It is a far different world in the marketplace than just the year 2000. Consumer faith has plummeted, military campaigns have begun and ended and time after time large corporations are accused of terrible misconduct before a rapid demise. Whereas the Sarbanes-Oxley Act of 2002 has dealt a tremendous hand for the betterment of ethical financial practice in the United States the question remains of just how our Country got here.

In Enron’s case, the direct answer is when “Enron’s directors waived the company’s code of ethics …to allow [Andrew] Fastow (CFO) to run an investment partnership that traded with Enron” (Farrell, 2002, p. 3). A company’s code of ethic sets principles for members of the group to abide by and to help facilitate understanding of right and wrong. Waiving the code of ethics was morally neutral from a business perspective as all directors informed and signed off on the concept. Nonetheless, when an organization removes its channels for accountability there opens opportunity for unethical behavior. Enron’s unethical practice was that the sole individuals reviewing transactions from the new investment partnership were run by Andrew Fastow and another Enron employee.

This created a severe conflict of interest that resulted in the CFO directly involved in negotiating transactions with their partnerships while under the guise of employees’ negotiating for them. There evolved a sort of unquestionable authority policy within the management structure of Enron that discouraged any operational questions regardless of their validity. In fact, one of the financial executives working with Enron’s law firm clarified that “…she feared Enron would implode in a wave of accounting scandals” (Farrell, 2002, p. 3). Unfortunately, that is exactly what took place when...
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