Ethics and Specialized Knowledge
Enron's case summary
Enron is an interstate pipeline company that was founded in 1985 as a supplier of power utilities. In the 20th century, Enron had grown quickly, and due to increased competition in the global market, the company decided to diversify and use international investments that would help in keeping their market position. Enron's rapid expansion exceeded their funding abilities, and this resulted in the creation of a complex web of off-balance-sheet financing (Silverstein, 2013). It is clear that they ignored the dangers associated with their activities in bringing serious losses. Moreover, in 2001 is when the company overstated on its revenues and its liabilities became hidden from the public.
Additionally, their driving culture became reinforced by incentive schemes that promised and delivered rewards that were huge concerning their compensation packages (Silverstein, 2013). As such, their outstanding performance required them to portray the company as able and the executives decided to use the mark to market valuation. The contracts produced using this approach had produced artificially high earnings and it is through this that investors were lured to continue purchasing the company stocks. Employees were also given suggestions about investing their pensions in stock...
For five years, the company managed to hide such fraudulent activities from the public, and those employees who doubted Enron's
financial condition were either fired or silenced.
In the meantime, the top executives at Enron embezzled the company and managed to drive the stock prices high as they pocketed the investors' funds. During this time, the company was not generating cash flow that was adequate to sustain their extravagant expansion activities. In December 2001, the management filed for bankruptcy; Arthur Andersen's
accounting firm was also affected and in the process because of its dealing with Enron, who was their client (Silverstein, 2013).
Ethical issue involved
The moral issue at Enron was the executives' personal pursuit of
wealth using rapid growth strategies. This then led to the introduction of extreme schemes of investments that attracted and motivated people who were bright and driven by diversification and expansion activities. However, this resulted in having an unhealthy focus on the company's short-term earnings. Another ethical assessment is that Enron massaged its growth figures on their income and this left them with a cash shortfall. Therefore, they resorted to masking their borrowing abilities, and this resulted in the creation of schemes that produced secret funding that was…
