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Three C's Theory

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Submitted By andres1213
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Andres Diaz
Business 201
9/26/14

Three C’s theory

In “It’s Good Business”, Robert Solomon describes the importance of practicing

good business ethics in decision making. He presents the three C’s theory of business

ethics: compliance, consequences, and contributions. When talking about good business

ethics we should be aware of the need for compliance with the rules, the contributions

business can make to society, and the concern for consequences of business activity.

Enron, a energy trader, was formed in July 1985 when Texas-based Houston

Natural Gas merged with InterNorth. At first Enron was only a natural gas provider, but

in 1989 Enron begun trading natural gas commodities, and in 1994 it began trading

electricity. Enron was considered one of the most innovative companies of the late 20th

century, after their scandal Enron became a symbol for corruption and mismanagement in

businesses. The scandal started in the late 90s when Enron pushed their debt obligations

to offshore partnerships, at the same time the company was reporting inaccurate trading

revenues. Enron used its partnerships to sell contracts back and forth to itself and booking

revenue each time. In 2001 Chairman, Kenneth Lay received an anonymous memo

expressing wariness about the Fastow partnerships and warned of possible accounting

scandals. On October 16th Enron announced a $638 million loss for the third quarter and

took $1.2 billion reduction in shareholder equity. Enron’s accountants began shredding

documents related to Enron audits. Eventually Enron was investigated on Nov. 8th;

Enron revised its financial statements, which posted $586 million in losses. Enron

became bankrupt on December 2nd.

Enron is an example of what happens when a business is not in compliance with

the rules. Enron tried moving

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