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Business Ethics Enron Case
Ethics is about how we meet the challenge of
doing the right thing when that will cost more
than we want to pay
-The Josephson Institute of Ethics
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Ethics
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Business Ethics Enron Case
Ethics
Business Ethics
Business Ethics involves set of actions that
make company more favorable to public and
employees.
It defines the code of conduct for employees
It makes the company activities more legal and
policies more social
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Business Ethics Enron Case
Ethics
Business Ethics
Present-daypractices
A Strong Trend: Integration
Post-modernism: de-re construction of values
Multivariate analyses
Multidisciplinary practices
Globalization of markets and cultures
Stakeholder theory, CSR
Integrated models of organizational
performance
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Organizational Ethics
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Business Ethics Enron Case
Ethics
Business Ethics
Present-daypractices
Key areas to focus
For any corporation
to be healthy andproductive, it needs
to be strong in four
core areas:-
Financial capital in terms of investments and
profits.
Technological capital in terms of cutting-edge
software and hardware.
Human capital in terms of knowledge,
expertise, and creativity.
Social-spiritual capital in terms of ethics,
relationships, meaning and purpose.
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Business Ethics Enron Case
Ethics
Business Ethics
Present-daypractices
Key areas to focus
Cultural aspect
-Toxic corporateculture
-Healthy corporate
culture
Culture typically includes the totality of
socially transmitted behaviors, beliefs,
attitudes, human thoughts and creations.
It affects every aspect of our lives - the way
we look at things, the way we act and react
and how we express our feelings.
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Corporate Culture
Toxic corporate culture
Authoritarian-hierarchical culture
Competitive-conflictive culture
Laissez faire culture
Dishonest-corrupt culture
Rigid-traditional culture
Healthy corporate culture
Progressive-adaptive culture
Purpose-driven culture
Community-oriented culture
People-centered culture
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The Enron Accounting Scandal
The Enron Scandal
Timeline
Causes of downfall
Trials and aftermath
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Enron The Key Players
Kenneth LayFounder
Jeffrey SkillingCEO (President)
Andrew FastowCFO
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The Enron Accounting ScandalTime-line
1985
1987
1990
1993
Ken Lay, Founder and CEO of ENRON, Created Enron as a result
of mergers of gas and pipeline companies in US South east at
Houston, Texas
Lou Borget of Enron Oil Trading is convicted of money
laundering and fraud costing Enron shareholders about $64
million.
Jeff Skilling joins Enron Corp after leaving the failed bank, First
City Bank of Houston which was seized for insolvency
Enron launches investments in South America and India (Dabhol
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Enron starts trading Electricity
Andrew Fastow creates an Chewco in an effort to hide debt and
inflate profits, but Chewco doesnt meet requirements to keep it
off Enrons balance sheet
Enron enters into several capital intensive ventures that turn into
financial disasters including a water distribution scheme and
power plants in Brazil
Enron withdraws from oil and gas productions and announces the
launch of EnronOnline, its internet-based commodity trading
1994
1997
1998
1999
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The Enron Accounting ScandalTime-line
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2000 Enron launches EnronCredit.com which buys and sells credit
risk to help companies manage the risk in trading
Ken Lay files fraudulent financial documents and Jeff Skilling
signs fraudulent financial reports to ArthurAnderson
Enron publishes a comprehensive ethics code which stressed on
Survival of the fittest instead of moral values.
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The Enron Accounting ScandalTime-line
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2001 Enron causes rolling blackouts in California
The inauguration of George W. Bush is attended by Enron
Founder Ken Lay and CEO Jeff Skilling, who each make
$100,000 contributions for the event.
Jeffrey Skilling commits securities fraud by omitting bad news
and lying to investors. He makes a false presentation to
investors and Enron executives receive million dollar bonuses.
Enron is named most innovative company in America for the
sixth consecutive year by Fortune Magazine
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The Enron Accounting ScandalTime-line
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2001 ArthurAnderson tells the Enron board of directors audit committee
that they have no concerns. Enron announces a first quarter profit of
$536 million
Lay and other Enron officials meet with the energy task force of
Vice President Dick Cheney. Fortune Magazine issues a story Is
ENRON overpriced?
Enrons Stock price closes at $59
.78
from $95
. Executives startselling ENRON Stocks
Jeff Skilling and Sherron Watkins resigns from the post of CEO and
Vice president respectively
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The Enron Accounting ScandalTime-line
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2001 Sherron Watkins, VP of Enron puts a one-page letter in
Lays suggestion box, questioning Enrons accounting
practices
ArthurAnderson starts document shredding and Enron
announces third quarter loss of $618 million.
Enrons assets (shareholder equity) are reduced by $1.01bn
The Enron 401 (k) retirement plan is frozen for
administrative charges
Andrew Fastow is forced to leave Enron
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The Enron Accounting ScandalTime-line
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2001
2002
The SEC starts investigating Enron and ArthurAnderson
o Dec 2, 2001 Enron declares bankruptcy and Ken Lay lays off
21,000 employees
ArthurAnderson states that it destroyed Enron documents.
o Former Enron executive J. Clifford Baxter found dead from apparent
suicide
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The Enron Accounting ScandalTime-line
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Mark-to-Market
accounting
Structured
Finance/Special
Purpose Entities
Corporate
Governance
The Enron Accounting ScandalCauses of downfall
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The Enron Accounting ScandalThe Trials
Ken Lay: Convicted for securities and wire
fraud, prison term up to 45 years. He died before
sentencing
Jeff Skilling: 24- Year prison term for fraud
convictions
Andy Fastow:10
Year sentence for fraud,conspiracy, insider trading. The Prison term was
reduced to 4 years after he testified in a plea
bargain against Lay and Skilling
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Shareholders lost $74 billion
Bankruptcy ofArthurAnderson
Sarbanes-Oxley act was passed in the
Year, 2002
The Enron Accounting ScandalThe Aftermath
7/21/2010 20IIPM SS09-11 - Business Ethics
By
Lumpi Mandal
Gokul Chandrappa
Maheedhar.k