Effects of Enron, Tyco, and WorldCom

Topics: Enron, Business ethics, Ethics Pages: 9 (4613 words) Published: November 30, 2014
Business Ethics is described as a form of applied ethics that examines ethical principles and moral or ethical problems that arise in the current business environment. In the ever-increasingly focused marketplace the demand for more-ethical business actions, dealings and procedures are becoming more evident and required. The need for “Business Ethics” has taken on several different disciplines within the marketplace in light of many corporate dealings that have left the public stranded in the wake of crumbled corporations due to unlawful and unethical behaviors. The struggles by corporations come with notion of perform or be classified by the marketplace as a “poor performer”. In reviewing ethical behavior in business is become very clear on how the balance of ethical behavior in business can be very easily become a disaster in wake of commonsense decisions gone wrong. This research paper is based on decisions being made in unethically manners that in the long run caused three of the largest corporate scandals of Enron, Tyco, and WorldCom. Before filing for bankruptcy in 2001, Enron Corporation was one of the largest integrated natural gas and electricity companies in the world. It marketed natural gas liquids worldwide and operated one of the largest natural gas transmission systems in the world, totaling more than 36,000 miles. It was also one of the largest independent developers and producers of electricity in the world, serving both industrial and emerging markets. Enron began as a pipeline company in Houston in 1985. It profited by promising to deliver so many cubic feet to a particular utility or business on a particular day at a market price. That change came with the deregulation of electrical power markets, a change due in part to lobbying from senior Enron officials. Under the direction of former Chairman Kenneth L. Lay, Enron expanded into an energy broker, trading electricity and other commodities. Enron became a giant middleman that worked like a hybrid of traditional exchanges. But instead of simply bringing buyers and sellers together, Enron entered the contract with the seller and signed a contract with the buyer, making money on the difference between the selling price and the buying price. Enron kept its books closed, making it the only party that knew both prices. Over time, Enron began to design increasingly varied and complex contracts. Customers could insure themselves against all sorts of eventualities such as a rise or fall in interest rates, a change in the weather, or a customer's inability to pay. By the end, the volume of contracts to actually deliver commodities, and Enron was employing a small army of PhDs in mathematics, physics, and economics to help manage its risk. As its services became more complex and its stock soared, Enron created a constellation of partnerships that allowed ways to shift debt off the books. Some partnerships' losses would have to be paid for out of Enron stock or cash, bringing the debts back home. There are indications that Enron executives and its accounting firm, Arthur Andersen, had warnings of problems nearly a year before. According to an email sent February 6, 2001, Andersen considered dropping Enron as a client. In August, Enron Vice President Sherron Watkins wrote an anonymous memo to former Chairman Kenneth Lay, detailing reasons she thought Enron "might implode in a wave of accounting scandals." On October 16, 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 November 8, 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. A $23 billion merger from rival Dynegy was dropped November 28 after lenders downgraded Enron's debt to junk bond status. Enron officials later announced that the company was actually worth $1.2 billion less than had previously...
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