Henry's Ethics

Enron’s Case Study

Team B

(Christopher Pelletier, Henry Smith, Garry L. Thomas)

MGT/216

August 18, 2010

Allyson Young

Enron’s Failure/Case Study

In 1985 Enron was founded as a pipeline company in Houston. By providing gas to businesses and utility companies, Enron was able to profit due to the sale at the fair value market price. Former chairman Kenneth Lay and Enron decided to expand their business by going into trading electricity. Eventually Enron would make one wrong move that lead to many more. By not bringing the buyers together to meet the sellers, it missed out on the most important part to building a solid business foundation. Instead of doing the right thing, Enron chose to enter into a contract with the seller and signed a contract with the buyer. This allowed them to produce an illegal profit on the difference between the selling and buying price of the business partners. This unethical behavior and cover up allowed Enron to rise to the top in the service industry.

Dilemma: The Washington post stated that Enron employed several PhDs in the economics, mathematics, and physics to protect, hide, and cover up what they were about to do. Enron would eventually cause a big dilemma. As Enron began to move forward, the company started to create unexplainable contracts, and relied on the highly skilled team members they assembled to manage and conceal the risk Enron was taken. The money over matter would soon fail. In August 2001, the lady called the whistle blower Sherron Watkins (formerly the Enron’s Vice President for corporate development) blew the whistle by sending an email to Kenneth Lay. The email was warning him that Enron was dangling in a wave of accounting scandals and fraud.

Solution: If Enron had removed the conflict of interest, simplification of partnerships, and provided a stronger board of directors, a lot of this could have possibly been avoided. Andrew Fastow was allowed to...