This research paper talks about the Enron case – how it rose to the level of one of the top companies in the world and then fell from grace so that it eventually had to file for bankruptcy. The paper will discuss the financial and accounting manipulations that Enron resorted to and the analysts approach towards its stock prices and will discuss its eventual fate. The study will revolve around how Enron shed its ethics in an attempt to report ever increasing income and keep its stock prices high and how despite its short-lived surge of growth, it is still, even 11 years after a bankrupt, struggling to stand on its feet. The role of Enron’s top management and its auditors is elaborated upon, as is the detail of the tools they resorted to in order to hide debts and inflate profits.
Enron was clearly a case of fraud where investors were cheated as the company management portrayed a rosy picture of a developing and expanding business while in reality the company’s expansion was going nowhere and most of its new businesses were unsuccessful. In an attempt to grow fast, Enron lost its roots and while trying to master itself in several different fields, forgot the basics of business.
The Fall of Enron
The fictional superhero Spiderman once said, “With great power comes great responsibility.” This balance between power and responsibility exists not just in our personal life, but also in business. Peter Drucker stated that “There is neither a separate ethics of business nor is one needed” and that “the ultimate responsibility of the company directors is not to hurt.” (Drucker, 1981) Business ethics include several guidelines, ranging from social responsibility of the business towards the environment; responsibility of the company towards its shareholders, that is, maximizing shareholder value without any unethical...