The History of Business Ethics. Business & Marketing Essay

History of Business Ethics
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May 13, 2020
1 The responsibility of the top leadership in a large organization concerning reaching a balance between profits and stakeholder concerns is how to promote and maintain an ethical workspace because as far as I’ve read, a good work environment with upright codes and conduct to follow would boost morale and positivity not only just among the stakeholders but also among the people working for the organization. The leaders should also be transparent towards their stakeholders on what is really going on with the company or the organization in that regard. Following this, when these leaders practice unethical measures in running their company, not only the plummeting of profits is at risk, sometimes even cases would be filed, and over the decades, some companies were put into the spotlight over various scandals.
One of these scandals is the fall of Enron Corporation back in 2001. Enron is a corporation out of the merge of Houston Natural Gas (HNG) and the InterNorth (another company that utilizes natural gas for energy) when the CEO Sam Segnar of InterNorth aimed to purchase Houston Natural Gas. InterNorth acquired HNG for $2.4 billion back in May of 1985, with Segnar as both the chairman and CEO, and putting their headquarters in Omaha. Following his retirement in 1986, Kenneth Lay was appointed on his seat as chairman and CEO, and on his term, the company was renamed Enron and was based in Houston. The company operated natural gas transmission networks, and one of the largest at that, with a total of over 36,000 miles of coverage. They were the largest dealer of energy and natural gas in the United States, they were listed on Fortune’s Most Innovative for many years, and in 2000 they reached the 7th place on the Fortune 5000 (Frontain). As the years go by and the corporation is facing an increasing number of competitors on the same trade in the energy business, their profits plummeted. As the shareholders pressure the company in regards to profit margin, the executives relied on shady accounting practices, most notably the “mark-to-market accounting.” This allowed Enron to write unfulfilled future profits into the current statements of income, showing the current profits in increased value than it really is.
Along with this, Enron also used special-purpose-entities, or SPEs, as a bin for their failed assets, making it seems that the company’s losses look less severe than what they actually were. In the middle of 2001, numerous analysts began digging into Enron’s publicly released financial statements, eventually leading to an investigation on transactions between Enron and its SPE. Their stock price of $90 per share fell down to $1 by the end of November 2001 in reflection to the emergence of the details of the accounting fraud they have committed, and on the following month, on December 2, Enron filed for Chapter 11 bankruptcy protection (Bondarenko). 3 people were mainly involved in this scandal; (a) Andrew Fastow, the former chief financial officer; (b) Kenneth Lay, Enron’s former CEO, and chairman; and lastly, (c) David Duncan, the chief auditor who shredded key documents relating t...