Business Ethics Case Study: Enron's Scandal and Its Consequences

This case study analyzes the Enron scandal, focusing on the ethical and legal implications of the company's collapse. The assignment examines the punishments given to Skilling and other executives, questioning whether the sentences were appropriate for their crimes. It delves into the role of the government and legal system in protecting investors, particularly employees who lost their savings. The study explores the fairness and ethics of the treatment of investors and the potential for the government to have done more to prevent the fraud. It concludes with the argument that the government's response, while including prosecutions, was insufficient in preventing the initial collapse and protecting the vulnerable stakeholders, and that the investor's treatment was unfair.

1
Business Ethic
Name
Course
Institution

2
Was the punishment of Skilling and Lay appropriate to their crime? Did the law go far
enough in punishing the managers and Board members of Enron? In your opinion, what
else could or should have been done?
The punishment pronounced for Skilling on nineteen of twenty-eight counts of wire fraud and
securities fraud and the conviction of Lay of all six counts of wire and securities fraud was not
appropriate for their crime. However, Lay died before he was sentenced due to a heart attack where the
judge vacated his conviction. Skilling was also convicted on charges of insider trading, with a sentence of
twenty-four years and four months in jail where he was ordered to pay six hundred and thirty million
dollars to the government, including one hundred and eighty million in fines (Goodwyn, 2018). In
addition, during the trial, sixteen people were found guilty at trial including four former employees of
Merrill Lynch after pleading guilty for a crime committed at the organization.
However, the punishment was too heavy in regards to the kind of crimes they had committed.
The judge should have been more lenient with Skilling by sentencing him to few years in jail with an
option of paying off the heavy fine. However, the sentence was that he would not be released before
serving twenty years and four months in prison. On the other hand, the law went far enough in punishing
the board members and managers of Enron, since the compensation plan for Enron seemed to have some
orientation towards the enrichment of executives rather than the generation of shareholder’s profits. In my
opinion, the judge should have sorted out and dismissed some of the counts before sentencing Skilling
and settle on a more lenient verdict against him.
What was done by legal, government, other to protect those that lost money following the
collapse of Enron? Was the treatment of the investors fair and ethical? Should the
government have done more to protect the weaker, less powerful investors like the
employees?

3
Following the collapse of the Enron and billions of money went missing, the legal and
government tried to protect the investors and employees by negotiating with the company to
compensate employees who lost their money. The treatment of investors was not fair and ethical
as their confidence declined due to falling in stock value. Furthermore, the majority of investors
were former employees, they had lied about the stock values for long period, and therefore they
had developed hope and confidence in the business. It was important for the government to have
had measures in place that could have averted the situation. Companies with such a huge
investor’s presence should have been on a very close government radar. The fraud and collapse
roots could have been detected at an early stage. The measures to protect investors should have
been implemented before the collapse of the company. With the fall of the company, the
government only consolation to the investors was prosecuting those responsible (Scu, 2018).
References
Goodwyn, W. (2018). NPR Choice page. Retrieved from https://www.npr.org/templates/story/story.php?
storyId=5430536
Scu. (2018). What Really Went Wrong with Enron? A Culture of Evil?. Retrieved from
https://www.scu.edu/ethics/focus-areas/business-ethics/resources/what-really-went-wrong-with-
enron/