Business Law and Ethics: The Case of Enron Corporation

Business Law and Ethics

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
ESSAY.............................................................................................................................................3
CONCLUSION................................................................................................................................5

INTRODUCTION
Business laws and ethics are two different terms that have become crucial for each and every
enterprise in recent scenario due to increasing fraud and unethical practices that adversely harm
individuals. Business laws are certain rules and regulations that control business operation for
betterment of people that are living in society. On the other hand ethics are moral principle and
values that guide individual whether particular action is right or wrong. This report is based on case
study of Enron corporation that have incorporated unethical practices in order to over-show its
profit margin. Therefore, report includes key information such as discussion of implication of law,
related case and outcome of particular action that are taken by company.
ESSAY
Enron is an American company that operates its business in energy industry that have
founded guilty for conducting accounting scandal in October 2001 that leads to bankruptcy.
Company have incorporated unethical practices in order to make misused of special purpose entities
and show more profit so that large number of investors are attracted to be part of firm. Management
of Enron have taken each steps to cooked the book or losses look much lesser than they actual are
and income higher than actually earned. Therefore, it can be stated that there are key issues in
accounting management that lead to fraud and unethical practices which lead to closure down of
enterprise in future circumstances. Such a unethical practices promoted by Enron have shaken stock
market and corporate governances as it have broken their trust and confidences level adversely
(What is the Enron Scandal, 2020). Enron before 2001, was transforming and diversifying its
business activities successfully that have contributed in increment of revenue from $10 billion to
$139 billion. But serious trouble happened when company diversified its business operations
beyond its core energy operation as it planned to invest in internet that have unlimited future. The
biggest mistake that company has done is heavy investment in marketer and service provider for
which it have taken heavy debt in order to have finance to various investments. Enron face
significant losses in foreign and other operations that resulted in losses or dried up of profit margin
of firms. So, management of Enron to cope up with such uncertain situation have decided to
incorporate unethical practices or misrepresentation of profit. Company by not disclosing true facts
and figure to interested stakeholders such as investors, customers, suppliers and employees have
broke trust of people. As many of the individuals have to loss their jobs, investors have to loss their
capital that resulted in less market confidences because it was felt that there is serious problem in
US system of security regulation.