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Unethical Leadership at Enron
Transcript of Unethical Leadership at Enron
Executives where not the only ones involved in these unethical practices several employees where involved as well.
In the state of California Enron diverted power from the state causing black-outs through the state. Resulting in Enron selling power back at higher prices.
In the accounting firm, the accountants used a practice where they anticipated future revenue and counted them as actual earnings on the reports.
During the Corruption
Enron was founded in 1985 due to a merger.
Began to flourish in 1988 after the deregulation of the energy market.
From 1996 to 2001 it was named America's Most Innovative Company.
In 2000 they had 22,000 employees and was listed under the top 100 best companies to work for in America according to Fortune.
This was all a front.
The Fall of Enron
Enron filed for bankruptcy in December 2001.
It was the most complex bankruptcy case in the history of the U.S. history.
The whole situation put thousands of employees jobless and investors moneyless.
Anderson was the auditor of Enron's finances. They were payed millions of dollars for their services in order to keep these scams a secret.
The Anderson conflict of interest was the reason why Enron's deceptions were possible and never revealed.
Stock Issues at Enron
All of the top executives knew of the deceptions at Enron.
As a result all executives began selling millions of dollars of stock at a premium price to gain more money.
As result of these massive sales the stock prices began to drop.
Kenneth Lay (Chairman) of Enron told investors to keep buying more stock and assured them they were going in the right direction.
After several cycles of executives selling their stock at premium prices Enron's stock dropped to $15 a share.
How They Were Corrupt
Top executives created false subsidiaries that looked like partnerships in order to sell assets and report false earnings
Offshore entities were used in order to evade taxes, inflate assets and profits, and hide their loses
Risky ventures were pursued in order to gain profit (EnronOnline)
Conflict-of-interest was completely disregarded in order to allow executives to benefit personally while also allowing loss of profits
Financial deceptions in the reports were used to hide loses and create an allusion of billions in company profit
All these deceptions lead to an all time high of stock prices ($90) in August of 2000
Employees were pressured to out-perform each other in sales at all times.
At the end of the fiscal year Enron would fire and replace the 15-20% of employees that had the lowest performance.
Whoever questioned these practices were either fired,reassigned, or withdrawn from any growth in the company.
What could have been to reduce this type of unethical leadership (how to reduce the risk of this happening again)?
The company Anderson should have not accepted the work Enron was offering to hide their fraud and deceit.
The employees who were bothered by these practices should have spoken up instead of keeping quiet.
The employees should have stuck to their morals and ethics and reported the work fraud and situations.
All companies involved in the fraud should have rejected any association with Enron in order to keep their company and image pure from the greed of Enron.
Thanks for listening.
Team Four (Three's Company) - Camillion, Daniel, Nadine