In an organization, the functions of the operations management department should consist of ethical values, integrity, competence and clear accountability of term papers. But Enron did not abide by these functions which led to its bankruptcy. We may say that the company's employees lacked Enron ethics. As the company's reputation grew in the global world, the competition within the employees rose and hence individual greed also generated in the atmosphere of the company's egotism. Every employee wanted to make it big, achieve a lot within the company, and thus there was high motivation to succeed and earn more. But in such an atmosphere, the tendency to distrust people around is high as each is only concerned about themselves. With the mistrust among the employees booming, highly confidential term papers got used in trade contracts. Thus, trading contracts were made in secret and its admission was also kept undisclosed. Dealings in the finance section grew rapidly without paying much attention towards the company's goals. Hence, the employees had started to ignore Enron ethics.
As a result, we cannot say that the problem rose due to the accounting practices only. It is not the financial department which is to be blamed solely. The problem which led to the bankruptcy of the company lay in the operations management department. On one side, Enron was gaining praises from the outsiders and on the other side, it was full of decentralized financial control and decision making structure which gave an illogical and unclear picture of the company's activities and operations. But we cannot say that the managerial performance was poor but the departments were ruining the ethical values and principles of the company. It was the duty of the managers and directors to check whether Enron ethics is being followed in their company or not. If they had supervised properly then they could have escaped from this bankruptcy tragedy.
Russell Clark owns and operates the website The-Ethical-Corporation.com [http://www.the-ethical-corporation.com/]
Article Source: http://EzineArticles.com/951763
How "ENRON Scandal" related with business ethics.
The Enron Corporation or we're known as Enron scandal was a largest American which sold electricity, natural gas high speed bandwidth internet connection for connecting computers worldwide and other services. Enron Scandal is known as Superstar Company on that time then The ENRON Scandal has been a case for study at many schools and university, because this company collapses by their unethical activity inside the corporation and organization. Today everyone still learn and explore the reason why the famous and successful company could get a bankrupt. I have research on internet and found many of results. The bankruptcy of Enron has resulted from aggressive and high risk businesses. The president was Jeff Skilling. The Enron's main businesses are investment and trading business, which often lack of investment money to support high risk. Enron have unrelated businesses, Enron invest a lot of money on the Dabhol power plants in India, Investment in water, natural gas and business Broad band Communication services, which resulted in the debt amounts 9 billion U.S. dollars .In section of power plants, Enron Power Co. Ltd is a major shareholder, then government and the power of the state of Maharashtra are breach of contract on the project by refused to pay the electric bill, power plant was shutdown on June 2001 included past damage from this case was burned Enron's money 5 billion US dollars, in latter day state of Maharashtra or government of India was auctioned the plant in cheap price. This was a plan of state of Maharashtra that go to bought the plant in cheap price as they could by used a dirty trick. The occupied plan to bought power plant wasn't only one case that made Enron fail, The business to business or we're called trading business have highly risk, such as Enron was a leader, initial and pioneer in the business that trading in electricity [power plant] and natural gas, but it was Enron businesses that brings revenue and profits as high as 70 percent of total company revenue. The company's profits that luxury. The stock market is as high as 90 dollar per share in August 2543 it was only a one-sided, in real situation Enron have a lot of dept, but does not appear in to hide Enron debt. The company was established the co-operate companies to beholders of debt. These companies have a chief executive of Enron president. Therefore the revenues as shown in the accounts are higher than it probably were. The real amount of debt was separated in the co-operate companies for makes dept looked lower that it was and these were disclosed to the public in latter day. The company's stock price it declined to only 0.01 dollars per share in December 2544, the financial position of the company fell nearly bankrupt.
Ethical is process on human behavior that everyone has to think about and follow to show their moral. Ethic is important for running the business and organization. It could not effect directly to the organization, but otherwise if public know the truth, It's going to damage on organization by reputation, integrity and moral, If any organization have this kind of problem on their reputation can continue run the business, but customers are going to talk about this as a humor and at least business will go to declined by consumers are stopped to buy your products and services because of the word to word on social. Today social is very important source such as social network and website board, if people are liked or disliked something they're often post online, it is a trendy for today, So it can be double edge sword to damage company reputation or generate reputation , it is base on how organization did with their customers or users. Partnerships are important for run business because partnership could support many things in business such as inside news, information and supply, So without partnership business can run, but it's still challenge.
Bighead was a word that good for explain Enron on that time. Enron was think they could easy to beaten other companies that established in old economy. This case strongly showed up the unethical thing by look down and depression other companies. According to the Enron think they're a company that innovate, generate and create new things, otherwise it's encourage themselves to broken the rules such as those managers are not follow until familiar with it. Skilling or Enron's president was good at manage or create a system that estimate the employees by ordering. Workers who listed at the tail of the list in 20 percents will be get fire. It is a case why employees at Enron always going to fight over each others for less their possible percent to get fire out of company. Furthermore if any employees or workers are said organization have a problem, it may cause damage company reputation that worker will easily get fire ever that story was true, so employees here will be totally silent for stay away from the trouble that could let them away from their jobs. One former worker of Enron said we have to lie ourselves that company couldn't be in trouble or get any problem. These are how Enron threat their workers and employees, I think it is too cruel for the workers, but reputation of company is important, So it's a good choice for stopped the gossip in organization about failure of company, but the system that used for fire 20 percent of less efficiency worker was too bad, they're should observe who are not work well and get warn, then fire them if they're still not work well. This system will automatic change opinion of employees and make them challenge each others, it may cause any employees in that 20 percents are good and honest, but environment was let employees to present or show how good they are only in front of their managers. Managers and exclusive staff also had a lot of sexual problem in organization and workers known, but can't do any think because they are easily to get fire.
Jeffrey Skilling's downgrade from CEO to prisoner was a result of his role as mastermind of the largest corporate financial in history of United stage, Skilling and his mentor committed massive of fraud on shareholder of Texas-base energy plant of Enron. Skilling has conspiracy on fraudulent accounting, which inflated or higher than it's usually been on company earning and the share price of Enron's stock. Enron executive including Skilling and his mentor are aware that company's financial in trouble, this information hidden by fraudulent account, Enron encourage or tricked their own workers to bought company stock. Before Enron's finance going to fell down, several executive of Enron sold their own stock as much as they could, 29 executives engaged in what we known as insider trading. The 21000 of workers are lost both of their jobs and their retirement saving. The average 62 percent tricked to bought Enron's stock, every lost job and every dollar was a result of fraud accounting and all of information oblivious to
Lack of monitoring system.
While reporting financial position. Must be audited by independent auditors (Auditor) an Andersen Company, which is one of the five major companies in the world's leading auditing. How to do a hidden clue. I have not been disclosed. The public or shareholders in any way. The government is responsible for monitoring. And supervise the business of the holding company does not monitor. Enron's reported financial position, as expected in spite of the analyst. Who noted that there is a lack of transparency and complexity. Since there are many politicians in the government. And Congress has a good relationship with the company. In the past, many companies, Enron donated money to these politicians. The role of national energy policy. With U.S. Vice President (Dick Cheney).
The liberalization of energy is causing the bankruptcy of Enron or not.
Enron has been very active in driving. The liberalization of electricity and natural gas. Which promotes the competitiveness of wholesale electricity. When Enron collapsed, and natural gas, thus causing doubt on that. It is because of the liberalization of energy or not. The regulatory bodies for energy. Federal (America's Federal Energy Regulatory Commission) has announced that the bankruptcy of Enron has caused the liberalization of the energy industry. The result of the crash. Account Control. And market conditions. The failure of Enron itself.
The bankruptcy of Enron have an impact on the world energy market much.
Bankruptcy of the Enron energy trading markets of concern to the energy company Enron was a giant in the world. The fear that The impact on world energy markets. But the impact was not so much as people think. Due to the following reasons.
1. Enron is not the truth. And it's not profitable. Of the energy trading business. I think that due to the Enron account. mark-to-market is estimated to average value. Of the instrument. Then recorded as revenue in the balance sheet. Make Money in the account. Does not match the amount of cash that the company exists. Although this method is simple accounting. The companies generally do well. No one else but the number is much higher than Enron (by revenue, reports earnings of $ 100 billion in 2543 and increased to 130 billion dollars. In the first quarter of 2544) results of the audit and revenue of Enron reduced to $ 8 billion in 2543 and market share declined to 15%, not 25% as reported earlier. this page.
Two. Some analysts commented. The bankruptcy of Enron, it does not happen immediately. They have come out in September 2543 that the Dynegy energy company competitors. Trying to help recover from the Enron bankruptcy. Plans to give up on November 28, 2544, when he found that the acquisition will only help extend the life of Enron to 30-45 days.
3. Enron used an asset-light business model is to sell assets without support. The business is financial trading and risk management are very high. The reason for the bankruptcy of Enron did not cause a direct impact on energy markets and the real power (Physical market) because of the use of fire to the amount of energy remains the same. And everywhere, it still has the power normally used.
4. Enron role in driving. The liberalization of electricity and natural gas. The promotion of competition. Of wholesale electricity and natural gas subsidiary of Enron Enron Online was one of the Inter Continental Exchange (ICE), a competitor, but replace it. This suggests that there is no monopoly in this business. To a large number of competitors. As a result, the market does not depend on a company too. It should promote the liberalization of the energy industry.
Although Enron's bankruptcy will not cause a direct impact. With market power. The cause was taken up in such companies have to consider carefully the balance sheet. Especially in a statement. And complex behavior. The secret hidden liabilities. A number of Enron-like accounting standards, resulting in a much more stringent. It also gives companies have realized the risk in trading. Assets without support. But all in all a great addition to Enron Enron was a pioneer. The liberalization of electricity. And natural gas. And now in the energy industry. Are grateful for the support to push Enron. The liberalization of electricity. And natural gas. The market has many competitors. Bankruptcy can be a problem. Corporate giants like Enron without much impact. Although the major is. It is not like any of the energy trading industry.