Enron Ethics

Only available on StudyMode
  • Download(s) : 186
  • Published : May 4, 2008
Open Document
Text Preview

Enron was one of America’s leading companies prior to its spectacular collapse in 2001. It was frequently named as one of America’s top 10 most admired corporations and best places to work, and its board was acclaimed one of the US’ best five, according to Fortune magazine. As America’s seventh largest company, Enron experienced explosive growth through the 1990s. It had revenues of US$139 ($184) billion, US$62 ($82) billion in assets and employed more than 30,000 people across 20 countries.

Enron did all it could to cultivate an upstanding public image. In 1997, the energy supplier was one of a small number of companies each of which donated more than one million dollars to the Nature Conservancy. In regard to the Kyoto Accords that were being negotiated at this time, Enron planned to benefit in two ways. By supporting the Accords, Enron was placing itself on the good side of the environmentalist public, while at the same time endorsing a document that severely limited the use of coal in energy production. Since Enron dealt only in natural gas, coal would have been competition. Though a praiseworthy idea at the time, the company's willingness to bend regulations to its own purposes might have given cause for alarm. Ken Lay and Jeff Skilling were not only innovative, but they were also increasingly creative when it came to figuring out ways to make money, and to expand Enron's horizons.

Enron created various types of contracts that protected both the buyers and sellers in case of price fluctuation over the length of the contracts. This new marketplace allowed energy users to predict and stabilize costs far into the future. This strategy created by Enron was based on the belief that it could be a big energy player without owning all of the power plants, ships and pipelines that most companies owned. Instead they would use contracts to control facilities in which other had invested. By 2001, Enron had evolved into a market maker for some 1,800 different products, many of them energy- or Internet-related contracts or derivatives the company had created itself.

Many of Enron's recorded assets and profits were inflated, or even wholly fraudulent and nonexistent, by putting debts and losses into entities formed "offshore" that were not consolidated with the company's financial statements. In addition, by the use of other sophisticated financial transactions between Enron and related companies formed to take unprofitable entities off the company's books. Its most valuable asset, the 1930s-era Northern Natural Gas, was eventually purchased back by a group of Omaha investors, who moved its headquarters back to Omaha, and is now a unit of Warren Buffett's Mid-American Energy Holdings Corp. After a series of scandals involving irregular accounting procedures bordering on fraud, perpetrated throughout the 1990s, involving Enron and its accounting firm Arthur Andersen, it stood at the verge of undergoing the largest bankruptcy in history by mid-November 2001. A rescue attempt by a similar, smaller energy company, Dynegy, was not viable. Enron filed for Bankruptcy on December 2, 2001. As the scandal was revealed in 2001, Enron shares dropped from over $90 to $0.30. As Enron had been considered a blue chip stock, this was a disastrous event in the financial world. Enron's plunge occurred after it was revealed that much of its profits and revenue were the result of deals with limited partnerships which it controlled. The result was that many of Enron's debts and the losses that it suffered were not reported in its financial statements. The facts of the situation dealing with the Enron case vary. They have false financial statements which is illegal by all means. These are sent out to all shareholders of the company and they were showing Enron to be doing extremely well while it was all a lie. In the Enron scandal all stakeholders were affected by what happened. This company staffed over 21,000...
tracking img