Verified Document

Business Ethics Recent High Profile Bankruptcies In Term Paper

Business Ethics Recent high profile bankruptcies in the U.S. corporate sector such as the ones filed by Enron, WorldCom, and Global Crossing in 2001 have highlighted the importance of financial ethics in business since lack of ethical practices were identified as the main cause of their failures. The business scandals underlined the importance of stricter regulation of the corporate sector and forced the U.S. legislature to pass the Sarbanes-Oxley Act of 2002 that contains a number of important provisions relating to business ethics. This paper about business ethics focuses on the impact of financial ethics in business.

Greed and an over-riding focus on increasing the profits and "share-holder value" usually leads managers and business leaders to disregard financial ethics in business. Although the impact of such "over sight" may be beneficial in the short run, it is invariably disastrous in the long run -- both at the individual as well as the collective levels. Examples of the negative effect of disregarding ethical practices abound.

At Enron, for instance, ethics was put on the back burner as the company's corporate culture was obsessively focused on making "deals" and...

Its Board of Directors disregarded the company's own Code of Ethics by doing business with thousands of Special Purpose Entities (SPEs), some of which were owned by Enron's Chief Financial Officer himself. The BOD turned a blind eye as the CFO made use of the SPEs to "park" Enron's troubled assets that were falling in value and unethically received more than $30 million in management fees from the SPEs. (Thomas 2002). Kenneth Lay, Enron's CEO and later Chairman, unethically exercised his stock options and pocketed profits, even as he was promoting Enron shares as a bargain buy to the employees. Since lower level employees emulate the behavior of their bosses, such cavalier attitude of the Enron managers towards ethics, created a culture in the company where "cooking of books" to hide losses and showing non-existent profits through dubious accounting practice became common practice. (Thomas 2002)
Some business people also erroneously assume that adherence to high ethical standards costs money. Contrary to this perception, it has been repeatedly observed that ethical practice in business actually saves money in the long-term. For example, improving the quality…

Sources used in this document:
References

Hackworth, Michael. (1999). "Only the Ethical Survive." Issues in Ethics - V. 10, N. 2, Fall 1999. Retrieved on July 1, 2005 from http://www.scu.edu/ethics/publications/iie/v10n2/ethical-surv.html

'Summary of Sarbanes-Oxley Act of 2002." (2005). AICPA Web site. Retrieved on July 1, 2005 from http://www.aicpa.org/info/sarbanes_oxley_summary.htm

Thomas, C.W. (2002). "The Rise and Fall of Enron; When a Company Looks Too Good to Be True, It Usually Is." Journal of Accountancy. 193(4), 41+.

Title IX of the White Collar Crime Penalty Enhancement (WCCPA) Act, which is part of Sarbanes-Oxley provides for penalties of $5,000,000 and/or imprisonment of up to 20 years for willful and knowing violations. ("Summary of ... " 2005)
Cite this Document:
Copy Bibliography Citation

Related Documents

Business General Please List Sections According to
Words: 7827 Length: 25 Document Type: Research Paper

Business (general) Please list sections according to instructions Exercise 1.1: Review of Research Study and Consideration of Ethical Guidelines Option 1: Stanford Prison Experiment Go to: http://www.prisonexp.org, the official site for the Stanford Prison Experiment. What do you think the research questions were in this study? List 2 or 3 possible research questions (in question format) that may have been the focus of this experiment. What happens when you put good people in an evil place?

Corporate Ethics As One Analyst
Words: 4342 Length: 12 Document Type: Term Paper

Capitalism does force us sometimes to make decisions in a context narrower than we need in order to make them morally, socially, environmentally (Rolston, 1988, p. 324). Rolston points to several cases of corporate myopia that was changed as customers and potential customers made their views known and demonstrated that hurting customers would harm shareholders as well. He points to the DDT scare in the early 1960s which led to

Marketing What Is the Relevance of Ethics
Words: 2264 Length: 8 Document Type: Term Paper

MARKETING WHAT IS THE RELEVANCE OF ETHICS AND SOCIAL RESPONSIBILITY TO BOTH MARKETING AND OPERATIONS ACTIVITIES? USE EXAMPLES TO ILLUSTRATE YOUR ANSWER. Ethics and social responsibility have always been critical issues in both marketing and operations activities. However, recent accounting scandals and bankruptcies involving high profile and well-respected companies such as Enron, Global Crossing, PG&E, WorldCom and numerous others have renewed interest in ethics and social responsibility. Social responsibility is the concept

Internal Control
Words: 580 Length: 2 Document Type: Term Paper

Internal Control The Importance of Internal Control Programs An effective internal control program in an organization ensures the efficiency of its operations and helps a business to attain its objectives by minimizing the chances of violation of rules and regulations by the employees. It safeguards the organization's assets and promotes the reliability of the accounting and financial information. Failure to implement an effective internal control program results in a corporate culture in

Ethical Leadership Given the Recent Crash on
Words: 4439 Length: 15 Document Type: Research Paper

Ethical Leadership Given the recent crash on Wall Street and the housing market symbolized by corrupt financiers like Bernard Madoff, ethical and moral leadership of corporations has become a major issue for those who study the American capitalist system. In reality, such concerns about the lack of morality in business, government and society as a while has increased significantly in the last thirty years, which undoubtedly has been an era that

Worldcom: The Ethics of Whistle-Blowing in Recent
Words: 3066 Length: 10 Document Type: Term Paper

WorldCom: The Ethics of Whistle-Blowing In recent years, it has not been easy for employees to completely trust the corporations for which they work. Accounting scandals have made the average employee question business practices unlike before. The large corporate American framework built in culture; vision, core values, accountability and self-worth seem to have gone out the window with a certain degree of worry. Is it risky to work for a big

Sign Up for Unlimited Study Help

Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.

Get Started Now