Write up a review of a famous (or not so famous) corporate blunder, which either
ID: 2666532 • Letter: W
Question
Write up a review of a famous (or not so famous) corporate blunder, which either ruined a company, or dealt it a significant setback. Was the disaster avoidable? Was it the result of a natural disaster for which the organization was unprepared, or was it more of an intentional nature? Was it an ethics or behavior disaster? Was it outright fraud? Was it an unfortunate event that nobody could reasonably foresee? Did the organization recover? Did they survive in the long run? Identify means and methods of reducing the damage potential from a repeat incident.Explanation / Answer
Enron’s corporate scandal had reportedly housed one of the largest accounting frauds in history. Enron was a once viable, working in diverse areas of business, until it began to employ bad business practices. Enron’s demise was a result of bad ethical business practices and degenerate philosophies of overall business ideals. Enron was established in 1985 by Houston natural gas CEO Kenneth Lay. Initially, Enron was a company whose main commodities were the distribution of gas and electricity. Enron quickly began to diversify into such endeavors as communication bandwidths and weather derivatives. On the surface, Enron would seem to be one of the most vibrant businesses worldwide; on the core Enron was suffering from bad ethical business practices This practice drove up their stock price to new levels, at which point the executives began to work on insider information and trade millions of dollars worth of Enron stock. The executives and insiders at Enron knew about the offshore accounts that were hiding losses for the company; however the investors knew nothing of this (Investopedia, 2007). Business ethics is defined as, “the range and quantity of business ethical issues reflecting the degree to which business is perceived to be at odds with non-economical social values,” (Wikipedia, 2007). Thousands of Enron employees and investors lost their life savings, children’s college funds, and pensions when Enron collapsed. Enron’s demise was due particularly to the people in management positions, Enron recorded assets and profits that 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 and, in addition, by the use of other sophisticated and arcane financial transactions between Enron and related companies formed to take unprofitable entities off the company’s books (Investopedia, 2007). Enron developed a defected philosophy of business and instilled an organizational culture that was overcome with lies and deceit. Philosophy of business is defined as, “the fundamental business principles that underlie the formation and operation of a business enterprise; and the moral obligations that pertain to it,” (Wikipedia, 2007). Enron’s management thought it better to save themselves, while the rest of their company was perishing. Enron saw the downfall of their company due to the scandal of the management. Enron’s management lost focuses of values, and adopted non-ethical business practices, and failed to uphold the moral obligations for which they were built upon.
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