The collapse of Enron Essay Example for Free

The collapse of Enron riseThe collapse of Enron seems to be rooted in a combination of the failure of top leadership, a bodily culture that supported unethical behavior, and the complicity of the investment banking community. In the aftermath of Enrons bankruptcy filing, numerous Enron executives were aerated with criminal acts, including fraud, money laundering, and insider trading. Ben Glisan, Enrons former treasurer, was charged with two-dozen counts of money laundering, fraud, and conspiracy.During the plea negotiations, Glisan described Enron as a house of cards. Andrew Fastow, Jeff Skilling, and Ken Lay be among the most notable top-level executives implicated in the collapse of Enrons house of cards. Andrew Fastow, former Enron chief financial officer (CFO), faced 98 counts of money laundering, fraud, and conspiracy in connection with the improper partnerships he ran, which included a Brazilian power intendt project and a Nigerian power plant project that was aided by Merrill Lynch, an investment banking firm. 2.How did the top leadership at Enron undermine the foundation determine of the Enron Code of Ethics? Enrons ethics code was based on respect, integrity, communication, and excellence. Kenneth Lay, former chairman and (CEO) of Enron Corp. , once quoted as saying I was fully exposed to not single legal behavior but lesson and ethical behavior and what that means from the standpoint of leading organizations and bulk. In an introductory statement to the revised Enron Code of Ethics issued in July 2000, Lay wrote As officers and employees of Enron Corp.Its subsidiaries, and its affiliated companies, we are responsible for conducting the product line affairs of the companies in accordance with all applicable laws and in a moral and honest manner. Lay went on to indicate that the 64-page Enron Code of Ethics reflected policies approved by the companys board of directors and that the company, which enjoyed a reputation for being fair an d honest, was highly respected.Enrons ethics code likewise specified that An employee shall not conduct himself or herself in a manner which directly or indirectly would be detrimental to the best interests of the Company or in a manner which wouldbring to the employee financial gain separately derived as a direct consequence of his or her employment with the Company. 3. How did Enrons incorporate culture promote unethical decisions and actions? Enron has been described as having a culture of arrogance that led people to believe that they could handle increasingly greater risk without encountering any danger. According to Sherron Watkins, Enrons unspoken meat was, Make the numbers, make the numbers, make the numbersif you steal, if you cheat, just dont get caught.If you do, beg for a second chance, and youll get one. Enrons corporate culture did little to promote the values of respect and integrity. These values were undermined through the companys emphasis on decentralization, its employee procedure appraisals, and its compensation program. Each Enron division and business unit was kept separate from the others, and as a result very few people in the organization had a big picture perspective of the companys operations.Accompanying this emphasis on decentralization were insufficient operational and financial controls as well as a distracted, hands-off chairman, a compliant board of directors, and an impotent staff of accountants, auditors, and lawyers. Jeff Skilling implemented a very rigorous and threatening performance evaluation process for all Enron employees. Known as rank and yank, the annual process utilized confederate evaluations, and each of the companys divisions was arbitrarily forced to fire the lowest ranking one-fifth of its employees. Employees much ranked their peers lower in order to enhance their own positions in the company.Enrons compensation plan seemed oriented toward enriching executives rather than generating profits for shar eholders and encouraged people to break rules and inflate the value of contracts even though no actual cash was generated. Enrons bonus program encouraged the use of non-standard accounting practices and the high-sounding valuation of deals on the companys books. Indeed, deal inflation became widespread within the company as partnerships were created solely to hide losses and avoid the consequences of owning up to problems. (p29-31) Weiss, Joseph W. (2009). Business Ethics A Stakeholders Issues Management onslaught