Enron Scandal: Who Are Responsible For EnronÐŽ¦S Bankruptcy
Essay Preview: Enron Scandal: Who Are Responsible For EnronÐŽ¦S Bankruptcy
Report this essay
Enron was once one of the worlds leading electricity, natural gas, pulp, paper and communications companies. However, in December 2, 2001, Enron suddenly filed for bankruptcy. During the ten years before EnronÐŽ¦s went bankrupt, EnronÐŽ¦s management had started transferring EnronÐŽ¦s funding to personal accounts and made fake balance sheets, which provided investors information about how this company goes. (Gibney, 2005) These illegal actions, performed by certain individuals, finally led Enron to go bankrupt. These peopleÐŽ¦s unethical behaviors such as CEO (Chief Executive Officer) of Enron, auditors and journalists caused Enron to go bankrupt, and therefore are responsible for EnronÐŽ¦s bankruptcy.
First of all, the hypocrisy and dishonorable actions of Kennie Lay, the former CEO of Enron, led to EnronÐŽ¦s bankruptcy. In August of 2000, when EnronÐŽ¦s stock price reached $90, investors were told to buy the stock because Kennie Lay informed them that it would climb until more than $130. However, at this time, Kennie Lay started selling his stocks because he knew EnronÐŽ¦s financial problems and predicted the stock price would drop off. (Sherman, 2002, p. 22-28) As an Enron executive, all of his concern should be focus on EnronÐŽ¦s profits, but all he cared about was his property. When Kennie Lay noticed EnronÐŽ¦s financial problem, he did not attempt to fix it, but made effort to maintain his own benefit and ignored the whole companyÐŽ¦s and investorsÐŽ¦ loss. His selfish and unethical behavior not only deceived the investors but also finally resulted in EnronÐŽ¦s bankruptcy. Therefore, Kennie Lay is one of the causes of EnronÐŽ¦s bankruptcy. In addition, auditors also played an important role in EnronÐŽ¦s downfall.
Auditors who were negligent of their duties caused EnronÐŽ¦s bankruptcy. Jeffrey Madrick, an editor of Challenge Magazine and a contributing columnist to The New York Times, reported, ÐŽ§most of the earning in three of the last five years were bogusÐŽKapparently, nobody was looking at cash flow, or if there were, they didnÐŽ¦t want to find out the truth.ÐŽÐ (2003, p. 5) As an auditor, the first job he needs to do is to check if this company has any financial difficulties or any unusual financial running. If a company has not made any profit for three years, it is an unusual situation and the auditors should have the ability to figure it out immediately and report it honestly on the balance sheet. Because of auditorsÐŽ¦ negligence, society never noticed EnronÐŽ¦s financial problem and was finally astounded by EnronÐŽ¦s bankruptcy. Moreover, journalists also play an important role in EnronÐŽ¦s downfall.
JournalistsÐŽ¦ corruption and negligence incurred EnronÐŽ¦s bankruptcy. Before Enron went bankrupt, Beth McLean of Fortune Magazine wanted to write a story to report that she could not find out how Enron made money. Later while EnronÐŽ¦s management received this news, they made every effort to stop this news publishing. (Madrick, 2003, p. 5) If Beth McLean published this story before the bankruptcy, investors may have gotten some warming and they