February 03, 2014
Prof. Troy Losee
When one defines ethics, it is deciding what is good or bad morally based a person's beliefs. It sets rules or principles that people follow in order to maintain honesty and integrity. Business ethics follows this same definition, only in a company setting. According to Gitman, business ethics are the "standards of conduct or moral judgment that apply to persons engaged in commerce" (2009). Business ethics are carried out to ensure that a certain level of trust exists between consumers and businesses. Acts such as fraud, inside trading, bribery, and misleading financial forecasts violates the standards set, which puts businesses at risk. Enron Corporation and WorldCom have fell victim to such acts, which later led to their demise.
Enron Corporation was an American energy, commodities, and services company based in Houston, TX.
It was first created in 1985 after federal deregulation of natural gas pipelines, which led to the merger of Houston natural gas and the Nebraska pipeline company InterNorth (Thomas, 2002). Founded by Kenneth Lay, he later recruited Jeffrey Skilling who was a former financial consultant as the CFO of the Enron Finance Corporation. Enron became the seventh largest company in America, with Fortune naming Enron one of the "World's Most Innovative Company" from 1994-2000. In December 2001, the company filed for bankruptcy following an investigation from the Securities and Exchange Commission uncovering acts such as bank fraud, money laundering, insider trading, and conspiracy.
Factors leading to the end of Enron
One of the factors that led to Enron's downfall is the accounting system mark-to-market accounting. Mark-to-market accounting involves estimations of future incomes when long-term contracts are signed (Pavel & Encontro, 2012). Enron reported revenue in company statements although the money...