Impact Widespread Call for an Ethics and Compliance Audit System The Enron scandal caught and gripped global attention. In response, massive efforts to recapture public trust and confidence were expended by install truly strict regulatory and corporate policies (Verschoor 2004)
Many were faced with the challenge of searching for ways to maintain consistency between the desire to be good and the desire to be successful. According to the New York Times article (Schwartz), mismanaging the management conflict process came from on top
An audit involves evaluating the assessments made by the management in their financial statements ensuring the accuracy of the assessments made and if the financial statement presents overall the companies financial standings. These financial statements made by the auditors are vital pieces of information to the public investors (Barrett, 2003)
Skilling was convicted on eighteen counts of fraud and conspiracy each of which carried a five to ten-year prison sentence and ten years for the one insider trading conviction making the sentence a maximum of one hundred and ninety years. Lay was found guilty of six counts of fraud and four counts of bank fraud which is a maximum of eighty years (Barrionuevo, 2006)
At the time however, it was not obstruction of justice and Arthur Andersen was charged with knowingly persuading someone to change or withhold documents. The case was eventually argued in front of the Supreme Court which found the trial judge had erred in their instructions to the jury and overturned the conviction (Hasnas, 2004/2005)
However, the one thing the Enron case proves conclusively is that code of conduct or ethics established by a company are only as useful as the person who is making sure they are being followed. The leaders of Enron did not set a good example for their employees and the board did nothing to work as the check on the executive officers to ensure the stability and future of the company long-term and signed of on ethics violations (Harvard Law Review, 2003)
These blackouts were orchestrated as away to drive up the prices of energy. Tapes of conversations were released to the public and the employee's are on tape mocking the people of California after they were at the root cause of the problem for consumers (Johnston, 2004)
By 2001, both companies filed for bankruptcy protection, Enron emerging with considerably less in terms of assets and employees, Andersen closing completely. The idea of the "Enron" scandal has become, in American popular culture, a symbol of corporate greed and dishonesty in accounting (Bryce, 2002)
Thus, the results had to be reconsolidate into Enron's financial statements. Instead, these debts were off balance sheet transactions; therefore, the company's true financial debt would not be realized until it was too late to recoup losses (Conroy and Emerson, 2006)
The criminal proceedings for obstruction of justice come from the shredding by Andersen officials of thousands of documents pertaining to Enron accounts, after these had been subpoenaed in several investigations. It seems, however, that the attempts to cover up a crime lead to costlier consequences than the original crime itself (Grey, 2003)
Andrew Fastow, Enron's CFO from May 1998 through October 2001, is credited with Enron's "innovative" financial dealings. Fastow, beginning in 1997, began using off balance sheet SPE's to increase capital and hide the mounting company debt (Kulik, 2005)
Under this program, buyers of natural gas can lock in long-term supplies at pre-determined set prices. In December 1996, Skilling is elected president and Chief Operating Officer and continues his role as Chairman and CEO of Enron Capital & Trade Resources (McLean and Elkind, 2003)
The bank essentially lent Enron $115 million in exchange for Enron's profits from the movie venture over its first 10 years. The Blockbuster deal never made a penny, but Enron counted the Canadian loan profit (Prentice, 2008)
In each of these cases, the virtual commodity became a contract, called a derivative, and was sold on the investment market. Enron poured billions into these trading ventures; some failed, most succeeded, as long as the true nature of the mechanism was kept hidden from the public and regulators (Rapoport, 2009)
These contracts guaranteed customers a steady supply at a predictable price. By bringing the laws of supply and demand into the energy system it provided a new way of doing business for energy customers (Seeger, 2003)
The indictment also alleges that Andersen told executives and partners to destroy as many incriminating documents as possible. It is baffling that Anderson, a reputable firm with a pristine image, could ethical violate so many regulations, not only by omission, but also by actively setting up some of the dummy accounts and corporations (Swartz and Watkins, 2003)
(2008) demonstrated that network conditions that were favorable for the suppression of the initial emergence of unethical behavior within corporations actually acted to promote the diffusion of this behavior. In regards to stakeholder theory, it has been suggested by some researchers that weakness in this area as it relates to social responsibility of businesses many have contributed to the accounting scandal experienced by Enron (Carson, 2003)
Instead of these unethical behaviors, the company could have had a committee devoted entirely to the monitoring of practices within Enron to ensure that practices were in line with ethical values. This committee could have developed a protocol based in normative business ethics theory (Hasnas, 1998)
Overall, the practices at Enron did not reflect ethical behavior, even though the CEO claimed to value a highly moral and ethical culture, and integrity was not exhibited by the company on any level. The idea the culture of Enron is involved in the demise of the company is supported through research as well (Kulik, 2005)
Overall, the practices at Enron did not reflect ethical behavior, even though the CEO claimed to value a highly moral and ethical culture, and integrity was not exhibited by the company on any level. The idea the culture of Enron is involved in the demise of the company is supported through research as well (Kulik, 2005)