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Corporate Misconduct
Recently, there have been a multitude of high-profile corporate scandals involving companies that were once well-respected. Generally, these corporate scandals related to corporate loans to insiders as well as to insider trading and accounting scandals (i.e., over-inflating income in order to please Wall Street analysts and shareholders). Examples of companies involved in such scandals include Arthur Andersen LLP, Enron, Global Crossing, and WorldCom. Not only do these corporate scandals hurt a company's profitability and reputation, but such scandals also de-moralize society and result in financial difficulties for employees who are laid off.
This paper analyzes and examines high-profile corporate unethical and criminal conduct. Part II outlines Enron's corporate and individual unethical and criminal conduct. Finally, this paper concludes with recommendations for avoiding ethical dilemmas and criminal conduct.
ENRON'S CORPORATE AND INDIVIDUAL UNETHICAL AND CRIMINAL CONDUCT
Perhaps the most recent high-profile corporate scandal involving unethical and criminal conduct is Enron, a previously high-flying energy company that skyrocketed...
What makes Enron particularly unique is that its criminal ethical lapses were so broad, both on a corporate and individual level. Briefly summarized, Enron created "shell" or sham corporations and used such corporations to over-inflate their profits in order to give corporate insiders personal loans and to meet and exceed Wall Street analysts' revenue projections. The purpose in overstating revenue was so that corporate insiders could dispose of their shares and reap enormous profits as a result of Enron's seemingly endlessly skyrocketing stock price. On a larger scale, Enron's stock collapse destroyed employee retirement accounts, and the bankruptcy cost more than 4,500 workers their jobs.
Numerous factors combined to result in the downfall of Enron. First, Sherron Watkins, the former Enron vice president of corporate development sent memos in August 2001 warning then-chairman Kenneth Lay that improper accounting could cause Enron to "implode in a wave of accounting scandals." Enron filed for bankruptcy December 2, 2001 after revelations about years of inflated profits and hidden debt. In addition to Kenneth Lay, Enron's collapse was due to the actions…
III. CONCLUSION
Corporations provide numerous invaluable functions, both on an individual and societal level. First, corporations offer individuals a source of income in the form of employment, stimulating economic growth both on a macro and micro level. Next, corporations offer individuals the chance to enhance their income by owning a portion of the corporation in the form of stock. Third, corporations develop products and services that are innovative, either because they improve on past products and services or because they invent a totally new product or service. Assuming everything is on the up and up, nearly everyone may reap the profits of a corporation.
In recent years, there have been numerous high-profile corporate scandals involving companies that were once well-respected. Generally, these corporate scandals related to corporate loans to insiders as well as to insider trading and accounting scandals (i.e., over-inflating income in order to please Wall Street analysts and shareholders). Examples of companies involved in such scandals include Arthur Andersen LLP, Enron, Global Crossing, and WorldCom. Not only do these corporate scandals hurt a company's profitability and reputation, but such scandals also de-moralize society and result in financial difficulties for employees who are laid off. In order to eliminate or minimize corporate scandals, there need to be refinements to existing laws (such as the July, 2002 refinement banning corporate loans to insiders) as well as greater oversight by neutral entities and individuals (i.e. compliance departments).
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