Examining a Business Failure

Examining a Business Failure

Examining a Business Failure

Running a successful business is no easy task. It takes excellent leaders to guide the business through the different stages a business will face and have the outcome of success. Sometimes these leaders can become less than ethical and the business will be in disastrous scandal. In October 2001 this was the case for Enron and its accounting company Arthur Anderson. The Enron Scandal ultimately lead the company to bankruptcy, disgrace, loss of jobs, and individuals were brought to trial.

Enron scandal was the result of the company’s accounting vagueness, intent entities, and poor financial reporting. Chief Financial Officer, Andrew Fastow and other top executives were successful in hiding billions of dollars of debt the company had with the help of Arthur Anderson. By hiding this debt the company’s board was mislead and did not release the state the company was in. These shareholders would lose billions of dollars when Enron’s stock price dropped to less than a dollar and because of this the U.S. Securities and Exchange Commission began an investigation. By the end of the year Enron filed bankruptcy and it found some of the company’s executives being charged with assortment of different charges. Enron scandal brought a great deal of question into corporate accounting practices and activities causing the creation of the Sarbanes-Oxley Act of 2002. (Berkowitz, 2002)

Significance of Organizational Behavior Theories

Enron’s scandal involving accounting manipulations, conflict of interest and cover-ups caused a company that had once known success to lose it all. Enron losing everything innocent employee’s lives were affected and it could have been saved if the company had adopted organizational behavior theories such as ethical decision-making, adoption of ethical behavior, job characteristic model, and a corporate policy that had checks and balances....