Ethics in the Enron Company - Essay Example

More reprehensible is the attempt of the top corporate hierarchy to feign total innocence throughout the investigation and blame everything on their subordinates. In the light of the Enron scandal, the US Congress immediately passed a law that would reform and revamp corporate practices in the country. Background: The History of Enron Enron began as a small energy company in Houston in 1985 founded by Kenneth Lay. The subsequent deregulation of the energy market gave the company an opportunity to expand into energy related ventures and pretty soon Enron catapulted itself into the world’s largest financial and energy trading company.

Its $10 million electricity sales in 1994 ballooned to $4 billion just 3 years later and in 1998, the company’s asset was reported to reach $23 billion (Solomon 34). It did businesses in various markets and industries and provided and traded internationally in the following: energy resources and commodities; financial and risk management services, and; electronic commerce (Joint Committee on Taxation 2003:55-56). In a move that shocked the business world, which by then was one of America’s ten largest companies, filed a Chapter 11 bankruptcy on December 2, 2001.

A few months earlier, Enron had been the subject of an investigation by the Securities and Exchange Commission (SEC) after it had publicly reported a $618 million third-quarter loss as well as a $1.2 billion decrease in shareholder equity. Enron’s seemingly sudden financial debacle took the world by surprise because accounting records released quarterly by the company did not in any way reflect its ailing financial condition (Joint Committee on Taxation 2003:55-56). Discussion: Ethics and Enron Subsequent investigation into the Enron case by the Justice Department revealed a pattern of fraudulent practices employed by Enron to show off a facade of financial wealth and stability.

These fraudulent practices included exaggeration of earnings in its reports, concealment of debts and losses through the use various subsidiary partnerships. In the wake of the Enron scandal its top officers were charged and convicted with various offences including fraud, conspiracy, insider trading, and money laundering. Lay, who was convicted of a total of various corporate offences died before his sentence could be served while Skilling, the company’s COO, was punished with imprisonment for a good number of years.

In addition, various offices who rendered services for Enron were also not spared such as: Vinson & Elkins, Enron’s Houston law firm, which was made to pay $30 million to Enron for providing erroneous advice to the company; Merrill Lynch, a brokerage and investment firm, which was ordered to pay $80 million to SEC, and; Arthur Andersen, Enron’s editor, who was barred from further practicing in auditing and charged with obstruction of justice for the destruction of Enron auditing documents during the investigation (Ferrel et al 2010: 420-425).

Lay and company’s primary defense strategy was to deny that Enron committed any wrongdoing and instead blame everybody, such as an adverse media, market panic and short-selling, but themselves. Moreover, the top corporate hierarchy often claimed innocence of what was going on and blamed their