Unethical Business Practice-a Case Study of the Downfall of Two Major Companies

2594 Words May 13th, 2011 11 Pages
Running head: Unethical Business Practices 1

Unethical Business Practices:

A Case Study of the Downfall of
Two Major Corporations

Sharon Purpuro

New Jersey City University
Unethical Business Practices 2


The following pages will tell the story of how two very successful companies met their

downfalls at the hands of some very greedy top executives and boards of trustees that

chose to look the other way all because of one common denominator - greed. The

tremendous pressure by stockholders and board members that is put upon companies and the executives that run them to out-perform the competition in an extremely competitive global marketplace can influence top executives and
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By 1994, it was operating power and pipeline projects in 15 countries and developing more in several others. In 1994, Enron also expanded its trading operations by buying and selling electricity after it had obtained exemption from regulation as a utility company. The deal-driven atmosphere at Enron was the primary cause of its downfall. The focus was on quarterly earnings and this put pressure on employees to do deals with no regard as to how they would be managed. As long as they ‘made the quarter’ they wouldn’t be yanked.
Unethical Business Practices 5
Employees’ compensation was also based on deals done and profits recorded in the previous quarter. The focus on earnings rather than cash led to a lot of unwise deals. As deals were being negotiated and closed all over the world at such a rapid pace, it left little time for accounting managers to perform due diligence. The deals that were being struck were very complex and Fastow, the CFO of the company, wasn’t even a qualified accountant. To add to the problems of Enron, board members knew about and authorized high-risk accounting policies because they too were benefiting financially from the fast and furious deals that were being struck. Everyone was getting filthy rich, or so they thought. Arthur Andersen (AA), Enron’s accounting firm, wasn’t an innocent bystander in this whole mess either. Enron was one of

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