Business Integrity: Enron Company

Business Integrity
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Business Integrity: Enron Company
Part 1
Enron Company is a perfect example of a business that fell due to its unethical actions. The company was founded in 1985 in Houston, Texas, following a merger between Houston Natural Gas Co. and Omaha-based InterNorth Inc which dealt in energy and commodities such as natural gases. Its continuous growth over the years and extraordinary performance in the stock exchange market saw many investors build confidence in the company. Despite its growth, the corporation came crumbling in the year 2000 when major scandals were unearthed in the company. In 2001, the Securities and Exchange Commission begun to investigate the company’s accounting practices (CNN Library, 2016). The investigations revealed the company had a way of hiding its financial losses in its businesses and other operations. For instance, the Enron could venture into a project like a power plant. The corporation could enter the projected profits into their books of account. If the project fails to meet the projected profits, then, they could transfer the losses to off-the-book corporation without affecting it bottom line (Troy, 2018). This accounting fraud kept the company in good shape as the investors and shareholders were not affected directly.
These malpractices happened under the Chief Financial Officer (CFO) Andrew Fastow was charged with fraud after he developed Chewco Investments Limited Partnership which helped raise the amount of debt that Enron would not guarantee. Fastow’s action made the Enron to acquire CalPERS’s joint venture. Enron’s arrangements with CaILPERS were later discovered thereby leading to the disqualification of Enron’s prior methods of accounting which indicated that it had little debt.
Fastow was among the officials who was charged over the securities fraud. Another major partner in the fraud was the company Arthur Andersen LLP and partner David B. Duncan who managed Enron's accounts. Arthur, a renown accounting firm with good reputation in risk management was stamping the company's financial books all along despite knowledge of the irregularities (Troy, 2018). Moreover, as seen in the actions of Enron's officials, it is notable that their irresponsibility's such as lack of integrity, arrogance, insatiable ambition together with reckless led to the company’s collapse.
Part 2
A lapse of integrity as seen in the case of Enron can also affect small businesses. According to Longenecker, Moore, Petty, and Palich (2008), the majority of small businesses can find themselves in cases where their integrity is in question because of financial issues like wire fraud or having leaders with unethical conducts like corruption. For instances a small business can find itself in a financial crisis where it cannot manage tom pay its employees. In ...