Corporate Governance and Ethics

This essay discusses the various ethical issues that might arise during the operations within the company. The essay highlights the importance of the use of the various ethical frameworks that are required for the proper decision-making on the corporate fields that are encountered by the companies that are active in the given markets. The essay further attempts to highlight the needs for the implementation of the ethical frameworks within the given organization that are operational in the given markets. The majority of the issues that have been highlighted in this case refer to the scandal that had affected Enron Corporation and had finally led to the collapse of the company.

Running head: CORPORATE GOVERNANCE AND ETHICS
CORPORATE GOVERNANCE AND ETHICS
Name of the Student
Name of the University
Author Note

1CORPORATE GOVERNANCE AND ETHICS
Enron Corporation had been founded in the year 1985 and had shot up to attain the
position of the sixth largest company of the world that had been dealing in the energy sectors.
The following essay discusses the various ethical issues that might arise during the operations
within the company. The essay highlights the importance of the use of the various ethical
frameworks that are required for the proper decision-making on the corporate fields that are
encountered by the companies that are active in the given markets. The essay further attempts to
highlight the needs for the implementation of the ethical frameworks within the given
organization that are operational in the given markets. The majority of the issues that have been
highlighted in this case refer to the scandal that had affected Enron Corporation and had finally
led to the collapse of the company.
The scandalous incident that took place at Enron is one of the major scandals that had
taken place in the recent times. The company had been founded in the year 1985 and had shot up
to attain the position of the sixth largest company of the world that had been dealing in the
energy sectors. The company was also enlisted as the seventh largest company that had been
featuring in the list of Fortune 500. However, the company had filed in bankruptcy in the year
2004 after 19 years of its foundation. The company had lost a huge amount of stocks and had
plummeted from a peak of US $90 to US $1. The company had gone bankrupt thereafter which
resulted in a huge disaster for the employees as well as the investors of the company. The
employees of the organization lost their job along with their pensions while the investors lost all
their funds that they had employed within the company.
The company had come up with the interstate pipelines during the foundational days of
the company. The company thereafter went on to deal with the diversification and the
investments on an international level. The company had invested in these fields with the

2CORPORATE GOVERNANCE AND ETHICS
anticipation of a better turnover. However, the company failed to achieve better results and
instead faced huge losses. This was followed by the investment of the company in the field of the
foray of the fiber optics which again led to the huge losses on the part of the company. The
company has been reported to have not disclosed the losses to the investors neither were the risks
revealed to the concerned investors.
The losses incurred by the company as well as the continuous bleeding state of the
company was revealed to the investors as well as the employees of the organization only after the
month of October in the year 2001. The company is further known to have been providing the
investors with the financial statements that were manipulated to mislead the investors. The
company had assured the given investors regarding the fact that the concerned company would
be facing a hugely high turnover in the upcoming years. The company had also revealed the fact
that the employees of the organization have been investing their own pension amounts in the
stocks of the organization which was another misleading factor for the concerned investors of the
company. These fraudulent and unethical activities on the part of the organization were
supported by the audit organization that was responsible for the auditing of the various activities
that were responsible for the development of the financial scenario within the company (Dibra,
2016). The company is also known to have been dealing in various other unethical practices as
well. These include the misleading statements that were put forth by the company towards the
clientele of the company as well as the employees of the company.
The major factor that had resulted in the defunct condition of the company in discussion,
Enron Corporation, was the ethical scandal and issue. The company was known to have been
majorly focusing on the development of the autocratic style of leadership within the company
and therefore led to the major focus on competition as well as the achievement of the financial

3CORPORATE GOVERNANCE AND ETHICS
goals of the organization. The company had implemented certain rating systems within the
organization in order to deal with the factors that are related to the motivation of the employees
of the organization. However, the plan had backfired and the employees had lost their motivation
to complete their job roles leading to the high levels of attrition within the company (MacCarthy,
2017). The company had focused on achieving the finance-related goals that were set by the
organizational management. The employees of the organization were known to have been
dealing with the various unethical practices that are related to the organizational approaches that
have been maintained within the company. The employees within the organization tended to
resort to the unethical practices in order to save their own jobs. The competition that existed
among the employees of the organization was unhealthy in nature and led to the several ways of
cheating among the employees of the organization. The employees of the organization were
judged and evaluated on the basis of the unethical means that they had adapted in order to deal
with the situations that they were provided. The employees who adopted fair means for the
completion of the jobs that they were assigned.
The company further lacked in the proper communication within the given company. the
lack of the communication made it further difficult to evaluate the overall performance of the
company. The employees seldom talked to each other and thus the knowledge base of the
company was found to be extremely low. The employees further lacked a proper understanding
of the job roles that they were assigned and thus led to the conditions wherein the employees
committed errors but covered up these errors through unfair means due to the fear of being
judged by their colleagues (Broberg et al., 2018). The company discouraged the employees from
questioning on the status of the company. The inquisitive employees were initially made to

4CORPORATE GOVERNANCE AND ETHICS
maintain silence regarding their doubts and later they were removed from the payroll of the
company itself.
The company in discussion might have implemented the utilitarian theory in order to
develop a better workplace environment within the company. The utilitarian theory states that the
decision-making body within the given organization should take in to account the benefits of all
the parties that would be affected by the decisions of the management while undertaking the
concerned decision. The employees of the organization tend to deal with their own prospects
while not considering the effects of their activities on the other employees of the organization
(Fryer, 2016). The company is further known to have been providing the investors with the
financial statements that were manipulated to mislead the investors. The company had assured
the given investors regarding the fact that the concerned company would be facing a hugely high
turnover in the upcoming years. The company had also revealed the fact that the employees of
the organization have been investing their own pension amounts in the stocks of the organization
which was another misleading factor for the concerned investors of the company (Mill, 2016).
The employees of the organization were known to have been dealing with the various unethical
practices that are related to the organizational approaches that have been maintained within the
company. The employees within the organization tended to resort to the unethical practices in
order to save their own jobs. The competition that existed among the employees of the
organization was unhealthy in nature and led to the several ways of cheating among the
employees of the organization. The employees of the organization were judged and evaluated on
the basis of the unethical means that they had adapted in order to deal with the situations that
they were provided (Wood, 2017). The implementation of the utilitarian ethics would have
helped in the development of the company in terms of the overall performance of company in the

5CORPORATE GOVERNANCE AND ETHICS
given market. This is even seconded by the philosophy that had been put forth by the celebrated
philosopher, Immanuel Kant.
Thus, from the above discussion, it might safely be stated that the company should have
implemented the ethical practices in order to deal with the bankruptcy that was faced by Enron
Corporation. The company had gone bankrupt thereafter which resulted in a huge disaster for the
employees as well as the investors of the company. The employees of the organization lost their
job along with their pensions while the investors lost all their funds that they had employed
within the company. The company had revealed the fact that the employees of the organization
have been investing their own pension amounts in the stocks of the organization which was
another misleading factor for the concerned investors of the company. These fraudulent and
unethical activities on the part of the organization were supported by the audit organization that
was responsible for the auditing of the various activities that were responsible for the
development of the financial scenario within the company. The implementation of the utilitarian
ethics would have helped in the development of the company in terms of the overall performance
of company in the given market.

6CORPORATE GOVERNANCE AND ETHICS
References and Bibliography
Abdel-Khalik, A. R. (2019). How enron used accounting for prepaid commodity swaps to delay
bankruptcy for one decade: The shadowy relationships with big banks. Journal of
Accounting, Auditing & Finance, 34(2), 309-328.
Bhaskar, K., & Flower, J. (2019). Financial Failures and Scandals: From Enron to Carillion.
Routledge.
Broberg, P., Umans, T., Skog, P., & Theodorsson, E. (2018). Auditors’ professional and
organizational identities and commercialization in audit firms. Accounting, Auditing &
Accountability Journal, 31(2), 374-399.
Broni, G., Velentzas, J., & Papapanagos, H. (2017). Marketing Ethics and Communication
Strategy in the Case of Enron Fraud. In Advances in Applied Economic Research (pp. 269-
278). Springer, Cham.
Dibra, R. (2016). Corporate Governance failure: the case of Enron and Parmalat. European
Scientific Journal, ESJ, 12(16), 283.
Eckhaus, E., & Sheaffer, Z. (2018). Managerial hubris detection: the case of Enron. Risk
Management, 20(4), 304-325.
Fryer, M. (2016). A role for ethics theory in speculative business ethics teaching. Journal of
business ethics, 138(1), 79-90.
Hosseini, S. B., & Mahesh, R. (2016). THE LESSON FROM ENRON CASE. Journal of Current
Research, 8(08), 37451-37460.

7CORPORATE GOVERNANCE AND ETHICS
MacCarthy, J. (2017). Using Altman Z-score and Beneish M-score models to detect financial
fraud and corporate failure: A case study of Enron Corporation. International Journal of
Finance and Accounting, 6(6), 159-166.
Mill, J. S. (2016). Utilitarianism. In Seven masterpieces of philosophy (pp. 337-383). Routledge.
Read, W. J. (2015). Auditor fees and going-concern reporting decisions on bankrupt companies:
additional evidence. Current Issues in Auditing, 9(1), A13-A27.
Wood, A. (2017). The final form of Kant’s practical philosophy. In Immanuel Kant (pp. 27-47).
Routledge.