Marketing Coursework Assignment: Fall Of Enron Firm (Coursework Sample)

ENRON Corporation
Student’s Name
Institution Affiliation
Date
1 Use any moral theories to critically evaluate the actions of the Chief Executive, Kenneth Lay.
The ENRON scandals brought about a moral impact on the primary stakeholders of the firm. This was evident according to the actions of the firm’s top management level of deceiving the stakeholders on their realizations in the market. In turn, they gained short-term proceeds according to their desires which affected their personal and business reputation and their image in the whole globe (Rezaee, 2011). The managers at the firm exposed themselves to the risk of criminal and civil prosecution as a result of the frauds undertaken under their management. This was a bankruptcy case worthy imprisonment. The board of directors are viewed as key failures on behalf of the firm as they were inattentive as they failed to present sufficient oversight and restraint to the top managements’ participation into frauds. This was attained through manipulation of accounting policy and collaboration with both the internal and external auditors. This in turn impacted negatively on the investors’ and public interests in the firm. This was misinforming of the misinformation about the firms’ financial performance reality that was not questioned on its accounting policies by the board of directors who represented the investors’ interest in the corporation.
According to Markham, 2005, the top management, under the stewardship of Kenneth deceived the firms’ employees on the actual financial wellbeing of the firm. Confidentiality and transparency are vital business morals that ought to be observed in all business entities. Kenneth breached the two morals in the firm through his act of exposing the stockholders investment to frauds. The firm had entrusted him with the mandate of leading the firm to attain its goal through his appointment in 1985. His action of manipulating the financial accounting rules portrays him as a traitor to the oath of being transparent in his dealings as the firms’ Chief Executive Officer. He also broke the norms moral that stipulates the observation of moral rules that govern the corporate social responsibility in the society. The active involvement of the firms’ stakeholders was among the failures as he did not involve the stakeholders actively on crucial decisions of the firm. This in turn harmed both the secondary and tertiary stakeholders of the corporation.
Kenneth allowed the firm to per-take on many large contracts within a short span of time. The failure of the contracts that the firm was unable to meet its demand led to its loss of professional credibility and client base across the globe. It is also evident that whole executive of ENRON corporation failed in perceiving the relevancy of the moral issues as they were not sensitive to them at all in their routine dealings at the firm. The executive appeared to be erroneously and overconfident on their initial distorted perceptions towards the morally acceptable business conduct. In the case of any challenge, as that provided by Fastow on the firms’ appropriateness of the financial structures, Kenneth dismisses him from duty. This is a wrong decision according to the theory of utilitarianism that requires proper decision on firms’ activities. Kenneth also allows the release of $1.2 billion from the off book of the partnerships to cover up the loss reported of $1billion in the last quarter of October 2001.
2 Set out the arguments in favour and against Norman Barry’s views above, using the case study as the basis of your analysis.
Norman Barry focuses on the current image of firms in the organizational market. He argues that modern capitalism has a role on the limited liability of corporations on the current scandals that have been reported. He argues that there several corporate abuse and accounting frauds in most of the companies. The frauds are mainly brought about as a result of misinterpretation of financial statements by the firms’ accountants and the auditors. In the case of Enron scandal, the executive collaborated with the auditors in alteration of the firms' financial information. This is against the corporate social responsibility of the employees in any firm. Norman is not in support of this form of collaboration among the Enron executive and its auditors who portrays themselves as traitors in their profession.
The accounting professional does not allow its member to engage in activities that are unethical in the financial industry. He states that most of the executives heading prominent firms across the globe have neglected moral ethics required in business operations. From the case, Kenneth takers over the firm with in 1985 with promises o9f making it a better place than it initially was. It is ironical that he works against his own words of promising to develop the firm more, instead he supports the use of unscrupulous financial and accounting practices that later destroys the firms' image. However, Norman does not fully blame the collapse of the firm on the auditors and executives; he points out that there other useful factors that also had a role in the scandals. The absence of diligence in the market oversight has resulted to improper functioning in the organizational market. The government has not fully laid across regulations that govern the running of such powerful firms in their routine activities. The absence of government monitoring has enabled the firms' staff to use the loopholes in fulfilling their desires using the stockholders wealth. In normal circumstances, it is the role of the authority to monitor all the functions of the firm and ensure it is operating within the stated policies. The Enron executive had a close relationship with the Bush’s government. This was evident that the government was aware of the functioning unit and procedures at the firm. Norman expected the government to monitor the business transactions in the firm in order to ensure the firms’ capabilities of meeting its mandate of attaining the goals of the investors.
3 Is it reasonable to hold any group (stakeholders) more or less to blame morally for the collapse of the company?
The collapse of ENRON points out to several groups of people that are worth being held responsible for the scandals at the firm. The firms’ executive, the auditing firm (Andersen), the board of directors and the government played a key role in the collapse of the firm. As reported by MacDonald & Hughes, 2009, the executive of the firm led by Kenneth were the master-mind of the fraud schedule in the firm. They attained this through manipulation of the financial accounting policies at the firm. The embezzled all the funds released by the investors into the company through the unscrupulous accounting and auditing transactions. It was alleged that under the leadership of Jeffrey Skilling, he was able to develop a staff of executives through which they utilized the accounting loopholes in the calculation of the firms’ statements. This poor financial reporting facilitated the hiding of billions in debt from the failed deals and projects. The process is boosted by the chief financial Officer Andrew Fastow and the other executives who played the role of misleading Enron’s board of directors and audit committee of high-risk accounting issues as well as pressure Andersen to ignore the issues being undertaken in the corporation.
Andersen auditing firm is another key party that stands to be held responsible on its auditing role on the firm’s financial statements of the firm. The auditing and accounting practices failed as a result of the poor auditing and accounting policy provided by the firm at that moment. Andersen firm collaborated with firms’ accountants in the auditing process of the firms’ financial statements were unrealistic information was used to indicate higher margins of profits in the company. They were able to present information that did not highlight the true image of the firm as the reports released were misinterpreted in order to bring out a prospering image if the company in the organization. The false representation enabled them to benefit on the revenue provided by the stakeholders without considering the future impact on the net investment of the stakeholders of ENRON. These acts by the auditors and firms’ executive portrait a perfect image for investment which attracted more investors into the company who had the desire of benefiting from the apparent financial proceeds in the firm. The board of directors are also to carry the burden as they failed to fully scrutinize the functioning of the whole firms’ management. They were easily convinced by executive’s representatives in the board on the financial reporting. The chief financial officer is able to present financial accounting information that is distorted before the board in the general meeting which is freely approved by the board members without scrutinizing the financial statements fully. Employees especially the managers in various branches betray the corporate social responsibility of putting forward the investor’s interests in the firm’s transactions. They have proper knowledge on the happenings of accounting misrepresentation by the auditors and accountants but decides to remain quite in order to safeguard their job at the firm. They fear losing their job if they reveal to the public the true financial image of the firm.
4 What practical steps could the various groups have taken to avert the collapse of the company?
The collapse of Enron is just among the many business scandals that been reported in accordance to the corporate responsibility in business world. This has called for the need of reformulating the corporate responsibility in the econ...