Corporate Scandals
The Enron scandal emerged in 2001 as it became apparent that the energy trader was overwhelmed by its debts. Corporate failure alone is no cause for scandal, but in this case Enron had undertaken a variety of illegal activities. They had kept key transactions off of their books, thereby hiding losses from investors and regulators (Wee, 2001).
Enron executives misused data to perpetrate their fraud. At the company, they were aware that many of their activities were either outright illegal or at least ethically questionable. Enron management actively obfuscated data and ignored warnings from internal whistleblowers. This made more difficult the already complicated analysis of Enron profitability data by its auditors. Ultimately, though the auditors, Arthur Andersen, joined in the obfuscation (Thomas, 2002). The result was that Enron was able to hide billions of dollars of debts from investors. When the debt was uncovered, Enron eventually went out of business and its executives faced criminal prosecution, many landing in jail (Houston Chronicle, 2001-2009).
The Enron case illustrates the limitations of data. The ability of outsiders to analyze Enron data was limited by the data that they received. Outsiders felt that the company was healthy because their analysis did not include vital information that Enron had hid. Ethically, the actions of Enron management were reprehensible. From a deontological perspective, they broke laws. From a consequentialist perspective, their actions resulted in significant financial losses for millions of people, job losses for thousands and a loss of public faith in the financial system.
The Enron scandal is perhaps the most egregious misuse of data in recent years. Data was manipulated and/or hidden from those whose job was to analyze the data. Wide-ranging and catastrophic losses resulted from this misuse. Had the data been presented factually and honestly, the analysis that flowed from it would have benefited Enron's internal and external stakeholders. The company may have suffered in the short-term but would have been able to survive in the long-term.
Works Cited:
Thomas, Cathy Booth. (2002). Called to Account. Time Magazine. Retrieved March 27, 2009 from http://www.time.com/time/business/article/0,8599,263006,00.html
Houston Chronicle: The Fall of Enron. (2001-2009). Houston Chronicle. Retrieved March 27, 2009 from http://www.chron.com/news/specials/enron/
Wee, Heesun. (2001). Enron in Perfect Hindsight. Business Week. Retrieved March 27, 2009 from http://www.businessweek.com/bwdaily/dnflash/dec2001/nf20011219_8118.htm
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