Analysis Of Enron: Unethical Entrepreneurial Practices

We frequently say about great kings and bad queens, big empires and evil empires., powerful presidents, and weekend presidents. However, what about great cooperations and bad corporations? Ethical position in corporate America is even as important as moral leaders in the political situation. Ethical standard is “Principles, that when followed, promote values such as trust, good behavior, fairness, and kindness.” Not all companies adhere to this standard, they have their own system in place. However, some companies break or do not have ethical standards. In this paper, I will be discussing an incident involving the company Enron and unethical behavior. I will provide background information on Enron companies, what they do? And Who they are? Secondly, I will discuss the issue that happened with Enron. Lastly, I will evaluate how Enron could avoid this situation and see if any other companies have done the same.

Before becoming Enron, the company as Northern Natural Gas Company in Omaha, Nebraska in 1930.” North American Light & Power Company and United Light & Railways Company each held a 35 percent stake in the new enterprise, while Lone Star Gas Corporation owned the remaining 30 percent” 2 These three companies help make up the Northern Natural Gas Company. Northern Natural Gas Company was able to get their investment shortly after the stock market crash of 1929. Believe it or not, the community was not a big fan of natural gas a heating fuel. However, what brought natural gas appealing to the community and customers was that it was a low-cost expense. Since the company began 3 months after the Great Depression it made the most logical and ethical sense to consumers who were trying to get back on their feet to start putting Northern Natural Gas in their homes.

In 1940 there were some changes of regulation and ownership Northern company had to go through “The Federal Power Commission, created as a result of the Natural Gas Act of 1938, regulated the natural gas industry's rates and expansion.” 2 The Natural Gas Act of 1938 helped the cost when Natural Gas started to ship to other cities. United Light + Railways decided to sell their share in Northern to the public in 1941, and the Lone Star Gas deal out its holding to its stockholder in 1942. In 1947, American light + power would let go of their shares to underwriters who then offered the stocks to the people. In 1954 the company would bring Canadian gas reserves to the continental united states. At this time the company was known as Northern Plains Natural Gas Company.

In 1980 Northern changed its name to InterNorth Inc. and was part of a take-over battle with Copper Industries Inc to want Crouse-Hinds Company (Electrical products) In 1981 InterNorth bought Crouse-Hinds. Northern overthrust pipelines company and Northern Trailblazers pipeline company to join the trailblazer pipeline in 1980. This ran from Southeastern Nebraska to western Wyoming. “In 1982, it formed Northern Intrastate Pipeline Company and Northern Coal Pipeline Company as well as InterNorth International Inc. (later Enron International) to oversee non-U.S. operations.” 2 InterNorth had entered into a joint venture with Valero in 1985 which transported and sold gas to industries users in Texas and Louisiana since they were competitors with Huston Natural Gas. However, they agreed to merge and was known as HNG/InterNorth with two headquarters in Omaha, Nebraska, and Huston Texas. In 1946 they decided to change their name to Enron Corp. Kenneth L. Lay, HNG’s Chairman joined together to chairman both companies now known as Enron Corp.

Now that you know more about Enron Corp.'s background we can now discuss what unethical standards are upheld. In November 2001Enron was ranked the sixth-largest force corporation in the world, multiple top executives went to court and were tried for fraud. This is publicly known as the Enron Scandal. Some of the executives had sold their company stocks right before Enron’s downfall. Enron’s lower-level employees were not able to see their stocks because of the 401K restrictions. The 401K restrictions are a “Penalty-free withdraw allows you to withdraw money before age 59-1/2 without paying a 10% penalty. It does not, however, mean tax-free withdrawal if you take a distribution before age 59-1/2 and meet any of these situations: You have a qualifying disability, for medical expenses deduction, you are required by court order to give the money to your divorced spouse, a child or dependent, you have experienced a disaster which has been granted relief by the IRS, if you left the company and have set up a schedule to withdraw equal periodic payments for at least five years or until you reach are 59-1/2, whichever is longer” 3 One of Enron’s employees had found a way around the system, a loophole for accounting, special purpose entitles and financial reports that were not done up to standard. Due to this, they were able to find Billions of dollars that were hidden in debt from projects and ideas that have failed. The Chief Financial officer had sought out that the company has been ignoring their issues with high-risk accounting practices, pressured audits, and accounting firms.

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As mentioned in the previous paragraph Enron had a collapse and “Enron rewarded their efforts and paid the top 140 executives $680 million in 2001. Enron shares were worth $90.75 at their peak but dropped to $0.67 immediately after the scandal was revealed and the company collapsed.” 4 Reading this statement made me want to learn more about this scandal since it looked like the company had known they were about to collapse and paid their employees billions of dollars to make sure they will be ok that was the case.

Now let’s get into more in-depth how the CEO's Opinion about the scandal and what he thought he was doing. Kenneth Lay and Jeffery Skilling the former CEOs are stating o his employees that he conducts business “in accordance with all applicable laws and in a moral and honest manner.” 5 their ethics code is based on multiple Boy Scout values; respect, integrity, communication, and excellence. They believed that offering his employees fair compensation through benefits and wages is a way to keep his employees happy. “The company policy discourages but does not prohibit customary expediting payments to low-level employees of foreign governments ... when such payments are to assure performance of a routine governmental action such as obtaining customs clearances, visas, and work permits ... .'

Enron decides to file for bankruptcy in August 2001, and Jeffery Skilling was tried to the court. One of his charges was” Inter alia, conspiracy to commit “honest services” wire fraud,18 U. S. C. §§371, by depriving Enron and its shareholders of the intangible right of his honest services. Skilling was also charged with over 25 substantive counts of securities fraud, wire fraud, making false representations to Enron’s auditors, and insider trading.” 6 Before the trial began the court-ordered to make sure they do a thorough screening on all jurors to make sure there was no corruption on making this a not fair trial. There were 77 questions that asked the jurors about their “courses of news and exposure to the Enron-related publicity, beliefs concerning Enron and what caused its collapse, opinion regarding the defendant and their possible guilt or innocence, the relationship to the company and anyone affected by it was demise”.

Three weeks before Skilling's trial date, one of his employees Richard Causey pleads guilty. This did not help to skill trial. Once the trial was over Jeffery's sentence was the most aggressive compared to the other executive employees that were trialed. He was a conspiracy, fraud, and insider trading. Houston court held his trial with 35 counts including fraud conspiracy and insider trading. Multiple of his employees were sentenced to appear on the stand at Jeffery's trial. One of them was Andrew Fastwon who was the former CFO who later on was founded guilty on two counts of conspiracy and aggreged to testify against Mr. Skilling. The judge sentenced him to 24 years in jail. However, in 2013 Jeffery go his term but by 10 years. In order for Mr. Skilling to receive this half-sentence, he must pay $42 Million to the people who were harmed by the Enron crime and to stop tampering with his beliefs. He is scheduled to be released on Feb 21, 2028.

The corporation's ethical attitude is tied directly to the moral integrity and quality of the organization's position. When the corporation lacks committed moral leaders, as did Enron, moral standards cannot be maintained. Because Enron lacked moral position, it had a disruption in its corporate structure and society(Gini,2004). Finally, the whole organization collapsed as a result of Enron made a society obsessed with the bottom line and not moral behaviors. Its culture required compliance and penalized dissent. This made employees embraced and complied with the society required by the company's individuals( tourists,n.d; Gini, 2004) Once leadership has crossed the road to unethical conduct immoral acts with turn into accepted, everyday action, and employees have more reason for remaining silent( Ignorance is Bliss 2007). For Enron's Employees to do more than act is a Grapevine conversation about the corporation's wrong practices and be the failure of the heavy-handed social norms of the organization.