2019-01-25T10:31:02+00:00 Assignments

BUSINESS ETHICS TO STAKEHOLDERS IN THE ENRON CASE

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BUSINESS ETHICS TO STAKEHOLDERS IN THE ENRON CASE

BUSINESS ETHICS TO STAKEHOLDERS IN THE ENRON CASE

The Themes of Business Ethics to Stakeholders in the Enron Case

Corporate executive management is supposed to maximize the wealth of the investors, while boosting the entity’s reputational capital, avoiding conflict of principal-agents interests, and complying with regulatory standards (Sims & Brinkmann, 2003). The Enron scandal left a big scar in contemporary business operations. Due to the scandal many people lost their entire pension, others lost their jobs, and the shareholders lost the money that they have invested in the company after it went bankrupt. The case represents various forms of unethical behavior which include insider trading, corporate governance, conflict of interest, and fiduciary responsibilities.

  1. Insider trading

Kenneth Lay the CEO, chairman and the founder of Enron lacked integrity and was dishonest. He committed many unethical practices as a CEO, for example, in 2001, he sold significantly of stock that he held in the company, a move that increased the share price further. This amounts to insider trading, where Mr. Lay benefited from the information he had on the state of the company (Rossouw and Van Vuuren, 2013).

  1. Conflict of interest

Arthur Andersen, who were the auditors of the Enron Company, acted unethically and played a major role in the scandal in four ways. First, AA helped Enron to manipulate the financial statements to avoid losing a key customer move that is both illegal and unethical. Secondly AA was offering consulting, external auditing and internal auditing services to Enron simultaneously violating auditing and accounting practices given the conflict of interest among these services (Kulik et al., 2008). On addition, there was a transfer of the employee from AA to Enron, which caused more conflict of interests and many top level executives of Enron were from AA. Lastly, AA destroyed the documents and papers of Enron after the scandal was disclosed, which made it difficult for the SEC to investigate the fraud. The conflict of interest evident between AA and Enron infringed on the auditing requirement for auditors independence and prompted AA to act unethically. The SPE’s were used by the participating executives to enrich themselves, which shows there was a conflict of interests.

  1. Fiduciary responsibilities

The management of the Enron ……………………


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