I do not think that Enron’s officers acted within the scope of their authority. This is because instead of choosing to own up to their mistakes and trying to salvage the situation, they buried themselves deeper into the ground with their lies and deception. They chose to give their investors a false assurance that everything was doing well when in actual fact, they were misleading them. They withheld facts that were detrimental to the decision making of these investors about whether to buy, hold or sell stock.
This was considered a crime punishable by law, and they were duly prosecuted. 3. Describe the corporate culture at Enron. According to a recent case study by Schuler (2002), the corporate culture at Enron “best exemplified values of risk taking, aggressive growth and entrepreneurial creativity. ” In real sense, these values are positive but when it came to their execution, they were not based on a genuine desire for corporate integrity and consumer well-being. Epron’s corporate culture did not have a firm basis as it was completely focused on monetary attainment.
This became its main focus and eventually the positive values became liabilities. Schuler adds that Enron’s corporate culture also appeared to equate size to success and they thus strived to grow in leaps and bounds. This dedication went out of control and “Enron became arrogant”. They then started to do such things as to hide debt, and to continue to paint a false picture of their organization to the outside world. The company promoted the myth of its own invulnerability probably making it easy for investors to seal large scale deals with them.
4. Discuss two alleged irregularities in the actions between sellers of securities and Enron. According to an article by the University of California (UC Newsroom, 2002), a number of banks and law firms played a big role in pulling off the Enron Securities fraud. One of the irregularities in the actions between sellers of securities and Enron was that Enron, with the help of some banks started hiding debt through the creation of phantom companies where they placed their bad assets so that they could not reflect on their books.
What this did was that it prevented the market and potential investors from making a correct evaluation of the company’s financial standing. It was the banks that would provide the financial tools for this deception to happen and in turn, they were paid off with access to special deals, premium payments and insider access to future lucrative transactions. When it came to transactions, these were masqueraded to look like investments that were reported as cash flow rather than debt. Two law firms also took part in this fraud.
What they did was that they structured phony deals that were not legal, and that would not be approved by regulators, in a bid to cover up Enron’s financial situation on the ground. 5. Discuss whether or not Enron was liable for the actions of its agents and employees. I believe that Enron was responsible for the actions of its agents and employees. This is because they themselves had failed from the very beginning. Every problem always has a root cause and in this case, it started with the corporate culture of the people that were working there right from top management.
The personalities of the people working in an organization are what make up the corporate culture, and in their case, according to Schuler (2002), their corporate culture made it a difficult task for ethical objections to be raised because it was not based on genuine corporate integrity. Corporate officers at Enron simply just ignored their responsibilities, because even though they knew about the companies malpractices, none of them bothered to blow the whistle. They either decided to turn a blind eye or they were outright criminal and abusive in their levels of greed and deception.
In a sworn testimony by former Enron Chief Financial Officer, Andy Fastow, together with the discovery of incriminating documents detailing the scheme, he says that the banks knowingly and actively helped to engineer Enron’s efforts to defraud investors out of billions of dollars (Davis, 2002). Even though it was actually the banks that masterminded the whole thing, Enron also takes their share of the blame because their agreement was quid pro quo, as they both stood to benefit.
References Davis T. (2006). UC Says Fastow Implicated Banks in Enron Fraud. Retrieved April 28, 2010, from http://today.ucsf. edu/stories/uc-says-fastow-implicated-banks-in-enron-fraud Ethics Resource Center. (2009). Ten Things You Can Do to Avoid Being the Next Enron. Retrieved April 28, 2010, from http://www. ethics. org/resource/ten-things-you-can-do-avoid-being-next-enron Schuler A. J. (2002). Does Corporate Culture Matter? : The Case of Enron. Retrieved April 28, 2010, from http://www. schulersolutions. com/enron_s_corporate_culture. html UC Newsroom. (2002). Banks, Law Firms Were Pivotal in Executing Enron Securities Fraud. Retrieved April 28, 2010, from http://www. universityofcalifornia. edu/news/article/4183
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