Corporate Finances

Essay by billyg May 2005

download word file, 2 pages 5.0

The article I have chosen to analyze is New Scandals, Old Lessons Financial Ethics After Enron by Gregory J. Millman. In this article, Millman interviews several different business leaders and executives to get their opinion on ethics within financial management and how to repair the damage that has been done by the Enrons of the world. I will provide a highlight of the main objectives these executives feel businesses should have in order to maintain a strict code of ethics. I will also give you their take on why many financial managers do not abide by this code of ethics. However, I will begin by discussing why ethics have such a huge impact on the decision-making process within many organizations.

Ethics has always been a concern within the financial departments of many companies. This is why there have been many internal controls established to eliminate the possibility of ethical breakdowns.

We have all heard about Enron, it was one of the most scandalous ethical breakdowns ever. The financial executives at Enron began to throw the generally accepted accounting principles out the window and before they knew it they were in over their heads. Stock prices began to stall and they were trying to merge with another corporation with large assets to cover up their lack of assets. The merger fell through and soon an external audit showed a debt/equity ratio of 70 to 75 percent, which was much higher than the 54.1 percent that Enron showed on their financial reports. After further research, the whole company was outed and began to fall apart. This is why ethics is so important to those working in the accounting field. One little indiscretion can snowball into a corporate meltdown.

Most of the executives interviewed for this article had basically the...