Running Head: THE ENRON BANKRUPTCY CASE 1
Case Study: The Enron Bankruptcy
Name
Institution.
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1. How did the corporate culture of Enron contribute to its bankruptcy?
The Enron organization was before identified as one of the world leading companies.
This was depicted from the fact it portrayed quality values like integrity and excellence in their
operations, respect and other high moral attributes (Ferrell & Fraedrich, 2015). Enron’s case of
bankruptcy is however said to have been brought up by the culture that was permitted to take
place in the company’s fraternity. Across the departments of management, the emphasis was
observed to project towards achieving the company’s financial goals and fostering competition
among the employees. These aspects when applied positively, they were observed to be
productive as they ensured that employees were reaching their highest potential. However, the
culture of operation was to some extent also proving to be so unethical because it was leading to
breaking of rules and embracing certain aspects of aggression and intimidation within the
employees working environments (Bratton, & Levitin, 2012).
As a result, their actions of accomplishments guided by the state of competition created
the existence deception in their culture. The employees were, therefore, getting involved in any
operation, be it legal or illegal with the claim that the end would justify the means. Many of these
employees were, therefore, getting involved in several cases of cheating and irregularities just to
make sure that they are at the top and they don’t lose their jobs. In other words, the employees
were not keen on looking at the ethical standards because they saw them as factors that were
delaying their progress when in the real sense they were after fast money and the prestige of
staying at the top of the list. According to Ferrell and Fraedrich (2015), it is said that a few
employees started cheating so as to perform better than the rest, therefore, was this trend was
noted by the other employees they started cheating more so that they can be able to beat them
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even more. As time went by all the employees were cheating without anyone even feeling that it
was so unethical for the business. All they were thinking about is that they had no choice and
everyone else was doing what had to be done for the greater good. The company executives and
other managerial staff were said to be just concerned about the numbers and not the real
economic value. As a result, they started witnessing the high level of deception, inconveniences,
and errors.
2. Did Enron's bankers, auditors, and attorneys contribute to Enron's demise
Enron unethical practices were observed to have been assisted by a number of external
associations. They had to seek help from this external associations because the situation was
now growing to be even4 tougher and was now putting them into a major ethical dilemma. This
was following the fact that they were doomed to fail now that the major forces of sustainability
were compromised. These forces were of matters relating to integrity and ethics. Enron reached a
level of cheating where the executives were now skillfully changing the corporate culture of the
company with its false image as a successful business in order to hide the irregularities they are
involved in (Ferrell & Fraedrich, 2015).
When people and other firms started to question their integrity they decided to employ
experts who are charismatic, dangerous, unpredictable, creative, and brilliant to take care of their
dirty work. In other words, they were planning to start covering up for their mess all that the
hired employees were to do was to perform as required and never bother to ask any questions
(Madoff, Kerviel, & Rajaratnam, 2017). As a token of exchange for their behavior, they
presented a list of corporate perks to their associates and the list was said to be including the
company gym and other aspects of concierge services. A good example of the company they
partnered with in this is the Arthur Anderson’s firm. The firm was responsible for helping the
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Enron company matters pertaining to devised accounting schemes that would render the
company to have a better look and not what they really are. Moreover, it was also covering up
for the company’s failure to make a close analysis of the various transactions that they either
forged or were involved in (Cernușca, 2011).
The Vinson and Elkins firm based in Houston was also observed to be another associate
they partnered with in approving questionable deals relating to book earnings and hiding their
outstanding debts. The Banks were also noted to be having a hand in this unethical situation.
This is evident from the fact that they participated in covering up the shady deals when they
knew very well that the accounting was irregular and greatly suspected. Enron was also noted to
have purposely created the so-called “special purpose entity” to assist with concealing of the
losses they happened to have made (Shirur, 2011). Moreover, there was also a case set up by one
of the executives of the company who goes by the name of Sherron Watkins. She created a
document that was outlining all the malpractices the Enron Company was involved in. She stated
the company was doomed to fail in future because it will be facing quite a number of scandals.
No action was taken against this proposal made by Watkins, as a matter of fact, the accusations
were downplayed by an accounting and law firm who thought the information she presented had
no merit.
3. What role did the company's Chief Financial Officer play in creating the problems
that led to Enron's financial problems?
A lot of blame concerning the fall of the giant company was mainly placed on the
Andrew Fastow by a former chairman of Enron. The former chairman was claiming that with
him, he had nothing to do with the collapse of the company. He even makes a note that the only
mistakes he happened to have made were recruiting Andrew Fastow into the Enron Company
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and promoting him to be the chief financial officer of the company (Ailon, 2011). However,
Andrew Fastow, on the other hand, claims that Lay’s statement is just blaming because in the
real sense he was being used by them as a scapegoat and that they were the ones who employed
him to make sure that balance sheets are being fixed. Andrew Fastow denied doing any wrong
but was still indicted for cases of conducting or being involved in the conspiracy, fraud, and
laundering of money (Ferrell & Fraedrich, 2015). Moreover, he was also charged with an
account for obstructing justice. He was to face a sentence of one hundred and forty years in
prison if convicted.
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References
Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases. Nelson
Education.
Shirur, S. (2011). Tunneling vs agency effect: a case study of Enron and Satyam. Vikalpa, 36(3),
9-20.
Bratton, W. W., & Levitin, A. J. (2012). A transactional genealogy scandal: From Michael
Milken to Enron to Goldman Sachs. S. Cal. l. Rev., 86, 783.
Ailon, G. (2011). Mapping the cultural grammar of reflexivity: The case of the Enron scandal.
Economy and Society, 40(1), 141-166.
Cernușca, L. (2011). Ethics in accounting: the consequences of the Enron scandal. Agricultural
Management/Lucrari Stiintifice Seria I, Management Agricol, 13(3).
Madoff, B., Kerviel, J., & Rajaratnam, R. (2017). The “Good or Bad Apple” Approach to Ethical
Decision Making. Business Ethics: An Ethical Decision-Making Approach, 10, 2.
