Enron Scandal

Report on Enron Scandal

On the previous class we have learnt that there is ethic behavior versus ethic dilemma. In the happenings of Enron Scandal, Most corporate in America collapsed due too many failures of savings and loan banks during the 80s. This report will further explain about the happenings of Enron Scandal and impacts of it.

Rise of Enron:

In 1985, Enron is form by the merging of two companies which are the Houston Natural Gas and InterNorth. At first, Kenneth helped to initiate the selling of electricity at market prices and after that he started the sale of natural gas. This make Enron sell energy at higher process and their revenue increase. To achieve further growth they started to diverse their business and their stock rose significantly and was rated as the most innovative large company in America.

Downfall Reasons:

However, the nontransparent financial statements and Enron lied about its profits and was accused of a lot of dark dealings including misrepresent earnings and modify the balance sheet and show wrong information in the company’s accounts. When all the deception and all the issues rose, it led to the bankruptcy of the company.

Unethical behavior that leads to the Enron Scandals:

- Lack of attention

Members of the Enron directors are not paying attention on the financial entities and all the reports with which Enron did business. This gave the party involved easily created a nontransparent statements and make all sorts of lying in the balance sheet in company’s account.

- Lack of Truthfulness

There are lack of truthfulness in the management about the financial statement of the company and its business operations. They tend to make changes in the accounts statement and use all accounting limitations to misrepresent earnings. According to McLean and Elkid in their book The Smartest Guys in the Room, "The Enron scandal grew out of a steady accumulation of habits and values and actions that began years before and finally...