Corporate Scandals the Enron Scandal

Corporate Scandals

The Enron scandal emerged in 2001 as it became apparent that the energy trader was overwhelmed by its debts. Corporate failure alone is no cause for scandal, but in this case Enron had undertaken a variety of illegal activities. They had kept key transactions off of their books, thereby hiding losses from investors and regulators (Wee, 2001).

Enron executives misused data to perpetrate their fraud. At the company, they were aware that many of their activities were either outright illegal or at least ethically questionable. Enron management actively obfuscated data and ignored warnings from internal whistleblowers. This made more difficult the already complicated analysis of Enron profitability data by its auditors. Ultimately, though the auditors, Arthur Andersen, joined in the obfuscation (Thomas, 2002). The result was that Enron was able to hide billions of dollars of debts from investors. When the debt was uncovered, Enron eventually went out of business and its executives faced criminal prosecution, many landing in jail (Houston Chronicle, 2001-2009).

The Enron case illustrates the limitations of data. The ability of outsiders to analyze Enron data was limited by the data that they received. Outsiders felt that the company was healthy because their analysis did not include vital information that Enron had hid. Ethically, the actions of Enron management were reprehensible. From a deontological perspective, they broke laws. From a consequentialist perspective, their actions resulted in significant financial losses for millions of people, job losses for thousands and a loss of public faith in the financial system.