Examining a Business Failure
Dani Stock
LDR/531
August 23, 2010
Wendy Lamont
Examining a Business Failure
The Enron scandal is just one of the business scandals in the last decade. The energy company and its accounting firm manipulated figures to make the financial condition look better. Thus stock prices rose and profits seemed to be up. Everything came unraveled and the company filed for bankruptcy December 2, 2001 (Houston Chronicle, n.d.).
According to Malcolm S. Salter’s book, Innovation Corrupted: The Origins and Legacy of Enron's Collapse, Enron's management-incentive system predestined the company for recklessness. Salter argues that the bonuses awarded for new products that were successfully traded skewed the vision of the company away from developing current ventures and moving it toward new ones. Top executives that achieved these goals were rewarded handsomely. Ultimately, greed became the motivating factor.
Robbins and Judge (2007) define ethical dilemmas as “situations in which individuals are required to define right and wrong conduct.” Individuals at Enron chose to break the law in order to increase profits. Citigroup was drawn into the deception in 1999 when senior credit officers failed to follow accounting procedures and helped Enron hide $125 million in debt (New York Times, 2002). Shareholders were benefitting from the unethical behavior of the leaders of the organization. The appropriate checks and balances were not in place to keep this kind of corruption from happening in this large corporation. The board of directors should have been able to spot the corruption based on the flow of cash in the form of bonuses to the top level executives. More than likely, the people on the board were benefitting from the deception as they had to have a financial stake in the company. It seems the company culture evolved into a celebration of gluttony.
When fraud begins at the very top of an organization, it easily trickles...