Examine a Business Failure

Examining a Business Failure

In order to succeed in today’s evolving global market, organizations must adopt business principles and practices of knowledge sharing, shareholder protection and ethical business practices. Many business crimes are committed because the companies apply pressure to managers and employees to produce results. Economic pressure is responsible for much business crime. Business ethics is important to a company’s future and the tone at the top (management) is crucial to modeling ethical behavior, and if, the top of the hierarchy disregards corporate ethics so will everyone else.

Failure of Enron

Enron was the United States’ seventh-largest corporation; an American energy company based in Houston, Texas, employing 22,000 people, and was one of the world's leading electricity, natural gas, pulp and paper, and communications companies, with claimed revenues of nearly $101 billion in 2000. The end of 2001 revealed that the reported financial condition was sustained substantially by institutionalized, systematic, and creatively planned accounting fraud, known as the Enron Scandal (EPSA, n.d.). On December 2, 2001, Enron filed for bankruptcy under Chapter 11 with assets of $63.4 billion, it was the largest corporate bankruptcy in U.S. history along with the dissolution of the Arthur Anderson’s accounting firm.

The company’s troubles occurred as massive amounts of unreported debt and a steep loss incurred in non-energy and oversees energy partnerships established between Enron and other companies. Enron’s recorded assets and profits were inflated even fraudulent and nonexistent. For several years debts and losses were put into entities formed offshore that was not included in the firm’s financial statements, and other sophisticated and arcane financial transactions between Enron and related companies were used to take unprofitable entities off the company’s books. Most of the profits...