4 Ethical Issues with Enron Essay

1026 Words Nov 16th, 2011 5 Pages
There was a vast number of ethical issues raised in the movie “Enron-the Smartest Guys in the Room” but the four I am going to focus on are listed below. Art Anderson, Ken Lay and all of the other executives did a number of unethical things which ultimately brought down Enron and affected thousands of employees and their futures. The bottom line was that each and every one of them acted out of greed for the almighty dollar.

1- Encouraging employees to invest and buy stock in Enron when they knew the truth about the lack of value in the stock.

As an employee you trust in your management to make the best choices both for you and for the business to succeed. Ken Lay and other executives strongly encouraged Enron employees to invest in
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This lasting affect also impacted hundreds of thousands of corporations who were now being questioned into the quality and accuracy of their accounting books. The Sarbanes Oxley act came as a result to better monitor these corporations. The act expanded repercussions for destroying evidence and expanded accounting accountability. These new and expanded laws caused corporations to change the way the do things and as a result they have to spend money to further abide by these laws.

4- Hid losses by moving around business units.

It was found out that Enron was recording their profits prior to earning them, known as mark to marketing accounting. While this is an accepted practice, these companies must acknowledge and report when losses are made on these businesses. Instead of reporting those losses, Enron would move them to other partnerships held by Fastow, the CFO at Enron. They stashed the debt in these partnerships that were financed through investment companies like Merrill Lynch and Citibank. At the same time if these financial companies did not hide these debts Enron threatened to pull their money out.

This effect was again broad for those investors of both Enron and the associated financial institutions. This accounting was wrong as people were being deceived not only by Enron, but by the financial institutions in which investors spend their money. Investors trust that the institutions will make the best and most ethical

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