ENRON: WHAT CAUSED THE ETHICAL

COLLAPSE?
 Questions for Discussion

1. What led to the eventual collapse of Enron under Lay and Skilling?

2.How did the top leadership at Enron undermine the foundational values of the Enron
Code of Ethics?
3. In retrospect: given Kenneth Lay’s and Jeff Skilling’s operating beliefs and the Enron
Code of Ethics, what expectations regarding ethical decision and actions should
Enron’s employees reasonably have had?
4. How did Enron’s corporate culture promote unethical decisions and actions?
 
5. How did the investment banking community contribute to the ethical collapse of
Enron?
 
1. What led to the eventual collapse of Enron under Lay and Skilling?
 
Answer:
 There are a host of reasons that led to Enron’s collapse. Taken together, answers to
all the questions stated here address this particular question more completely. To
summarize, Enron’s collapse was caused by: (1) A corrupt leadership at the top,
(2) Violation of laws that were not enforced by the company’s CEO, Chair and
members of its Board of Directors, and auditors (Arthur Andersen), (3) Lack of
regulation Enron had one of the best ethics code in the industry. The collapse of
the company clearly illustrates that written ethics and compliance codes alone do
not work. Corrupt leaders at the top (and middle) of organizations is a recipe for
disaster. Probably no code or law can prevent the willful intent with the available
means for criminally minded and greedy CEOs (Lay and Skilling), CFOs (Fastow)
and other top level officers (individually and as coalitions) from defrauding and
stealing from their organizations. Secondly, as the Sarbanes Oxley Act and the
Revised Federal Sentencing Guidelines show, effective communication,
monitoring, and auditing of the organization’s legal and ethical compliance
standards and procedures must be enforced. Kenneth Lay paid lip service to
ethics. He said he fully understood the legal, moral, and ethical implications of
leading organizations and people.
In an introductory statement to the revised Enron Code of Ethics issued in July 2000,
Lay emphasized that Enron’s officers and employees should conduct the
company’s business affairs “in accordance with all applicable laws and in a
moral and honest manner.” Enron’s ethics code was based on the values of
respect, integrity, communication, and excellence. The code specified that
“An employee shall not conduct himself or herself in a manner which
directly or indirectly would be detrimental to the best interests of the
Company or in a manner which would bring to the employee financial gain
separately derived as a direct consequence of his or her employment with
the Company.” So much for ethics codes with leaders who do not ‘walk the
talk.’ Answers to the following questions add to the response given here.
Lay and skilling also created a corrupt elite coalition among themselves,
Fastow, and several of the traders in the company. The now classic film ,
“Enron: The Smartest Guys in the Room” reveals the inside workings of this
courrupt subculture that became the dominant engine that drove the
company into bankruptcy—without the lower level employees ever
knowing. Do values count? Yes, in Enron’s case, the dominant coalition’s
values were greed, flamboyance, waste, and win-at-any-cost.
2. How did the top leadership at Enron undermine the foundational values of
the Enron Code of Ethics?
 
Answer:
 
Key players among the top leadership were Andrew Fastow, Jeff Skilling,
and Ken Lay. Each of these individuals contributed to undermining Enron’s
foundational values; their activities raise crucial questions about how
closely they adhered to the values of respect, integrity, communication,
and excellence.
 
Skilling, for example, did not take the obligation to communicate very
seriously when he accused an investigative reporter of unethical behavior
because she asked him to clarify Enron’s “nearly incomprehensible
financial statements” and he refused to do so. A subsequent effort to have
three key executives meet with the reporter to answer her questions
“completely and accurately” turned out to be more deception than
clarification.
 
 The decentralized nature of Enron also created communications barriers and
prevented all but a few people in the organization from seeing the “big
picture.” The communication value was also undermined when Fastow tried to
conceal how extensively Enron was involved in trading in order to maintain the
high market valuation that was essential to keeping Enron from collapsing.
Lay’s assertion that he lacked any knowledge of what was happening is
another action that brings into question the commitment of Enron’s leadership
to the communication value.
 
Enron’s commitment to excellence was perverted through the “rank and yank”
performance appraisal system and the compensation system that enriched
executives, encouraged people to inflate the value of contracts, and promoted
use of non-standard accounting practices. Both the performance appraisal
system and the compensation system were creations of Enron’s top
leadership.
 
Collectively, all of the preceding decisions and actions did little to support the
values of integrity and respect. In addition, Fastow’s exemption by the board
and top management from the company’s ethics code undermined the values
of respect and integrity.
 
3. In retrospect: given Kenneth Lay’s and Jeff Skilling’s operating beliefs and
the Enron Code of Ethics, what expectations regarding ethical decision and
actions should Enron’s employees reasonably have had?

Answer:
 
The employees were kept ‘in the dark’ on the misguided and corrupt
strategic and operational dealings of Lay, Skilling, and Fastow. Sherron
Watkins (the whistle blower who helped reveal Enron’s illegal activities)
warned Lay several times but to no avail. In an August 2001 interview it was
noted that, “Sherron Watkins, an Enron vice president, had sent an
anonymous memo to Lay that read, ‘I am incredibly nervous that we will
implode in a wave of accounting scandals.’Of course, that's exactly what
happened. After the company's demise, the investigating U.S. Congress
discovered Watkins' memos to Lay and other top executives. (After sending
the memos, she had met with Lay with no results)” (Carozza, 2007).
 
 With regard to lower level employees, what could they have reasonably
expected regarding Enron’s code about ethical decisions and actions? In
hindsight, Enron was continually winning Fortune Magazine’s best-in-class
awards, Arthur Andersen (Enron’s auditors) saw no problems year after year
with Enron’s accounting procedures, the SEC (Security Exchange Council)—
Enron’s regulator—had no problem with Enron’s business practice, so why
would lower level employees question the company that was adding to their
wealth before the crash? Watkins stated in 2001, “Enron was primarily a
financial trading house.
A financial trading house lives on its investment grade rating and its
reputation. Any hint of trouble and business disappears like water through a
sieve. When I met with Ken Lay, I was both optimistic and naive. I not only
expected that a thorough investigation would occur but I also expected
Enron to establish a crisis management team to address the financial peril
Enron would face when the accounting was exposed, which in my opinion
was sure to happen. In the long run, companies rarely get away with
‘cooking the books.’ But no other top executives came forward to back me
up and Ken Lay gravitated toward good news and didn't quite accept what I
was saying. (Carozza, 2007).
4.How did Enron’s corporate culture promote unethical decisions and actions? 

Answer:
The succinct and unequivocal answer to this question is that Enron’s corporate
culture did little to promote the values of respect and integrity that were
articulated in the Enron Code of Ethics. These values were undermined through the
company’s emphasis on decentralization, its employee performance appraisals,
and its compensation program. By keeping each Enron division and business unit
separate from the others, very few people had a holistic perspective of the
company’s operations. This decentralization, in conjunction with insufficient
operational and financial controls as well as “a distracted, hands-off chairman, a
compliant board of directors and an impotent staff of accountants, auditors and
lawyers, contributed to a corporate culture that enabled the occurrence of
unethical decisions and actions.
The extremely rigorous and threatening performance evaluation process utilized
peer evaluations wherein employees frequently ranked their peers lower in order
to enhance their own positions in the company. Enron’s compensation plan
“seemed oriented toward enriching executives rather than generating profits for
shareholders,” and encouraged people to inflate the value of contracts and to use
non-standard accounting practices.
 The performance appraisal system and the compensation systems helped define
and reinforce a culture that was rife with the potential for unethical decisions and
actions. In short, Enron’s culture encouraged and reinforced unethical decisions
and actions. As revealed by whistleblower Sherron Watkins, “Enron’s unspoken
message was, ‘Make the numbers, make the numbers, make the numbers  if you
steal, if you cheat, just don’t get caught. If you do, beg for a second chance, and
you’ll get one.’ ”
5. How did the investment banking community contribute to the ethical collapse of
Enron?
 Answer:
Investment banks were not found legally liable in actively contributing to the
Enron scandal. “In what may have been the final blow to plaintiffs’ attempt to
hold several investment banks liable for their involvement in the Enron scandal,
the United States District Court for the Southern District of Texas granted
summary judgment in favor of the investment banks after several years of
litigation.
However, the debate continues with regard to whether or not J.P. Morgan and
Citibank, in particular, violated their ethical responsibilities to shareholders and
the public in continuing to loan Enron funds while the company lied and
defrauded all who were involved during the scandal. An Economist article
described the role of these banks this way, “Might J.P. Morgan and Citi have let
their lending standards slip in order to win investment-banking business from
Enron, allowing the company to become over-leveraged? Did being both a
creditor of Enron and an adviser create acute conflicts of interest as the company
approached bankruptcy? As creditors, the banks may have had an interest in
preserving whatever value Enron had left to maximise their chance of being
repaid. As advisers, they may have had reason to promote riskier strategies in a
bid to keep Enron alive and stop its shareholders being wiped out.
It could also be argued that the investment banks were one of several “watchdogs”
who failed to regulate Enron during its scandalous period. Where were Enron’s
public auditors, board of directors, federal government watchdogs—e.g. the SEC
(Security & Exchange Commission)? Unfortunately, the lessons from Enron have
been repeated as witnessed by the latest subprime lending crises that also
involved investment banks in even more risky practices than Enron.
Accounting Irregularities at WorldCom
 Questions for Discussion
1 .What are the potential ethical implications of pursuing a corporate strategy of rapid
growth?
2 .When a company lends one of its key executives a substantial sum of money, is a
wise business decision being made?
3 .How did WorldCom cook its books? What made these accounting irregularities so
extraordinary?
1 .What are the potential ethical implications of pursuing a corporate strategy of rapid growth?

Answer:

In the business environment where information asymmetry and moral hazard arewidespread,
management must make rapid decisions and the correct ones in order to stay aheadof the
competition. However, poor decision making and a disregard for moral scruples indecision
making can lead to disastrous results in the long-run. Pursuing a policy of rapid growthmay
dramatically improve the value of a firm, its share price, and the confidence of
itsstakeholders, but if this policy of rapid growth is not carried out in a transparent and
accountablemanner, the consequences of the illegal measures to facilitate this growth and
prosperity wouldensure a rapid burnout of this strategy.
At World Com, management including CEO Bernard Ebbers and CEO Scott Sullivan were
involved in unlawful financial reporting activities of the firm’s financial results. On the
surface the company appeared profitable, but in reality World Com was in serious debt. The
consequences of these poor ethical and moral decisions made by management resulted in the
company going bankrupt. Stockholders, creditors, employees, and their families were
negatively affected by the poor judgment of management. Employees lost their jobs and lives
were ruined. Individuals lost tremendous amounts of cash when the firm went bankrupt and
when it experienced a rapid decline in share price.
When the strategy of rapid growth is done in such a way so as to inflate share prices and
promote a sense of wellness in the business, a series of ethical implications arise. The
business is jeopardizing the equity and capital of its present and future stockholders to justify
a continued existence.
 This can lead to serious consequences for the company such as solvency and jail
time for the individuals who are responsible for falsifying records and employing
questionable accounting practices. Corporate Strategy determines the way in which
business will be conducted and the relative importance of all the stakeholders
expectations; investors, customers and employees. At the same time Corporate
Strategy must strike a balance between the goals of different business units within
the corporation. Pursuing a corporate strategy of rapid growth may result in
management departing away from an organization’s vision and mission statement.
If rapid growth becomes the main driving force of an organization which is to be
attained regardless of the means, the organization may suffer in the long-term.
Customer retention, goodwill, favorable reputation, employee morale and job
satisfaction, a strong sense of corporate culture, and building relationships with
stakeholders are some of the other criteria management must be mindful of when
enacting corporate policies.
2 :When a company lends one of its key executives a substantial sum of money, is a
wise business decision being made?

Answer:
Why or why not?While WorldCom’s annual revenue growth was declining
significantly, the executive board of WorldCom decided to loan its CEO Bernie
Ebbers $366 million to pay off margin debt so that he would not have to sell his 17
million shares of WorldCom stock. This action in essence, would have prevented
any external parties from taking control over WorldCom.
The Principle of Double Effect is a doctrine, which distinguishes between the
consequences intended and those that are unintended but foreseen. Before this
principle could be used to analyze the decision of the company three preliminary
questions must be answered;•What is the action in question:Lending the CEO
Ebbers substantial sums of money to repay marginal debt.
What is(are) the good effect(s):CEO Ebbers able to pay off debt and also retain his
ownership of 17 million shares inWorldCom.•What is(are) the bad effect(s):The
loan triggered investigations by the United States Securities and Exchange
Commission (SEC), which then led to the resignation of CEO Ebbers.
Under the Principle of Double Effect, given the fulfillment of four conditions,
an action with at least one good effect and with one or more evil effects may
legitimately be performed. The conditions are as follows:1)Lending money to
repay a debt is generally considered morally good.
2)The pay off the debt, and CEO Ebbers retaining his 17 million shares in
WorldCom were not obtained through the investigation started by SEC nor the
resignation of CEO Ebbers.
3)The executive board of WorldCom did not intend for an investigation to
commence because of the loan to Ebbers, nor did they plan to pressure CEO
Ebbers to resign.
4)The existence of the loan to CEO Ebbers caused an investigation to commence,
which the executive board had not control over, therefore it had to be allowed. As a
result of this investigation, CEO Ebbers was forced to resign.
With the four conditions being proved, it can be said that the act of lending a
significant sum of money to a top executive was morally tolerable, however the
decision to lend CEO Ebbers a large sum of money may not be seen as a wise
business decision.
3 .How did WorldCom cook its books? What made these accounting irregularities so
extraordinary?

Answer:
WorldCom’s Chief Financial Officer Scott Sullivan employed a variety of tricks to
manipulate its financial results. Firstly, WorldCom treated routine expenses as
capital investments. These normal operating expenses must be subtracted from a
company’s must be subtracted from the company’s revenue in that year. These are
expenses that arise from the daily operations of a business and should be matched
against the revenues of the business in that year as stated with the prudence concept
of accounting. On the other hand capital expenditures are subtracted from revenues
a little at a time over many years. In the short term, treating normal operating
expenses as capital expenditure lets money flow to the bottom line and boosts
financial results, thereby conveying a situation of growth and profitability that is
not true.
This simple trick in manipulating the books was somehow missed by WorldCom’s
auditor – Authur Andersen. From the case it was stated that over a period of 15
months, more than $ 3.8 billion of WorldCom’s daily operating expenses were
recorded as the purchase of assets such as equipment or real estate.
This in effect made WorldCom’s profit before taxes and other charges appear $3.8
billion higher than they actually were. On June 25, 2002 WorldCom disclosed that
it had improperly accounted for $ 3.8 billion in expenses, by August 2002, this
amount rose to $ 7.1 billion. Eventually the amount of improperly accounted for
expenses was a significant $ 11 billion.
On September 23rd, 2002 Business Week revealed in a report a variety of other
tricks used by WorldCom in cooking its books. The report stated that WorldCom
double-counted revenues from a single customer resulting in overstated revenues.
Another trick WorldCom used was to keep delinquent accounts on their books long
after the customer stopped paying. This allowed the company it as revenue instead
of a liability for which it should really be accounted for. Yet another trick
WorldCom used was not to close dead accounts, thereby inflating revenues. These
dead accounts should have been treated as bad debts which represents a loss to the
company.
These pressures to inflate revenues and treat normal operating expenses as capital
expenditure had a pervasive impact on the company. Employees lower in the
hierarchy who refused to follow with the scandal ran the risk of losing their job.
This created fear among employees and they thus gave into the scandal.
These accounting irregularities did not involve complex “doctoring” of the books
but rather they were very simple and could have been easily detected by the
auditors, but what is strange is how these accounting professionals couldn’t detect
such simple accounting irregularities. This was simply because the auditors were
involved in the cooking the books of WorldCom.
Arthur Andersen…No More: What Went
Wrong?
1:Would you destroy electronic or paper records within a firm for which you worked to
eliminate evidence that might be used against you? Why or Why not?

Answer:
The electronic records or paper records of a company should not be destroyed even
if they may be used against the employee. Firstly persons should not engage in any
activity where there is need to conceal electronic or paper records. A high degree of
honesty, integrity in a person’s professional life should be maintained at all times so
that there should not be occasions where this sort of action may be perceived to be
necessary.
After Enron Corporation’s financial difficulties became public in 2001, an attorney
for Arthur Andersen, Enron’s auditor, instructed its employees to destroy all
documents related to the Enron account except for the most basic work papers.
This situation can be analyzed using the Triple Font Theory. The object in this case
is the destruction of all electronic and paper records with intention of concealing
irregularities in the company’s business operations. The circumstances of this
action are obstruction of the course of justice, since important documents necessary
for use by the Security and Exchange Commission in their investigation into the
business activities at Enron were irretrievable.
In addition, legal action against the employee can be taken if the data contained
in the documents were revealed. There is not sufficient reason in this case to
justify the action and therefore destruction of the records is not permissible.
You should not destroy paper and electronic records of a firm which you are
employedwith the sole purpose of eliminating evidence that may be used
against you. Clearly the only reason why there would be need to do this is
because an action performed by an employee lacked honesty and integrity and
therefore would have grave consequences so there was need to conceal the
records. By doing this you would be protecting your self interests since these
records may be used against you. However, at the same time those records
would probably be vital to an organization. If you have done something wrong
or engaged in some sort of activity that goes against the company’s policy you
should own up to your actions instead of destroying the records of that firm at
which you are employed. Most companies also have strict record retention
policies which will be violated if electronic and paper records are destroyed.
2 :Explain how Andersen’s loose internal controls created potential for ethical failures,
such as the one at Enron.

Answer:
The nucleus of success of any organization should revolve around the fundamental
values of integrity, honesty, accountability, stability and consistency. Adherence to
these values ensures that the organization maintains not only financial success but
also a sound ethical standing in society. The critical element in attaining this type of
corporate status is stringent internal control within the organization which would
make certain that best practices are employed to circumvent the possibility of any
unethical incidence. It is exactly this scenario which occurs in this case with Arthur
Andersen and Enron, where loose internal controls and a lack of conformity to
basic principles of corporate ethics were endorsed. This practice is what ultimately
leads to their demise economically and ethically.
Arthur Andersen being an auditing firm and is supposed to rely heavily on
confidentiality and responsibility; this was clearly not the practice in their
relationship with Enron and other clients with whom they conducted business.
Several key factors can be attributed to this notion of “loose internal controls” at
Andersen and it is a top-down deterioration of ethical behaviour. There was
corruption of values at each level of the organization, from the Chief Financial
Officer, to the attorneys to the executives and other members of staff.
Anyone who opposed their practices was immediately dismissed from their duties.
Since, this phenomenon permeated each executive level of the organization, there
could be no effective control exercised so as to prevent any further degradation of
its ethical obligations.
There was destruction of all audit material related to the Enron account, deletion of
emails and other electronic files and many regional partners and front-line
executives overruled experts when it came to concerns over the actions of
Andersen. It seemed as though these practices were practically sanctioned within
this space, and eventually it also permeated through to Enron, as former Andersen
partners became staffers on Enron’s management team.
Using the triple font theory, it can be noted that the moral object in this case is
undoubtedly that of Andersen executing accounting transgressions, by inflating
audit material in an attempt to enhance the financial status of its clients. The
intention is clearly to augment its own reputation and financial standing in the
process, and the circumstance is ultimately one where there were false auditing
material and lack of honesty. It can be notes that these practices can be deemed
unethical in every sense of the word, as it was vincible ignorance on the part of
everyone involved, they knew exactly what they were committing and the
repercussions of their actions.
Due to the loose internal controls, there was a complete failure and degradation
of both Andersen and Enron and several senior executives faced grave
consequences. There should have been stiffer control of senior management
and their relationships with clients. Also, these shoddy auditing practices
should have been clearly detected and dealt with and not propagated at almost
all levels of management. Therefore, because of this evolved culture within the
organization whereby senior management endorsed these acts and there was no
strict method of detection, there was an increased potential for the drastic
ethical and financial failure of both companies involved.
3 :Why are “arms length relationships” crucial for ethical integrity in auditing? How
did Anderson fail to maintain an “arm’s length relationship” with Enron?

Answer:
In a business where continued survival depends solely on one’s good reputation,
strict “arm’s length relationships” are critical to upholding ethical standards in
auditing procedures. It is extremely important that an employee is always held
accountable for the actions they make. This is done to ensure that their ambition is
first and foremost for the institution they serve and not themselves.
Effective oversight of the accounting profession and of independent audits is
critical to the reliability and integrity of the financial reporting process. An example
of a body that has developed a list of general principles for oversight of audit firms
and auditors that audit financial statements of companies whose securities are
traded in the capital markets is the Technical Committee of the International
Organization of Securities Regulators (IOSCO).
Oversight of auditors can occur in several ways, including within audit firms, by
professional organizations and public or private sector bodies, and through
government oversight. In addition, oversight may be provided by supervisory
boards as in the case with the Professional Standards Group (PSG), and audit
committees representing investors in matters relating to individual companies.
The reasons for this oversight of auditors include the protection of investors,
ensuring that practices are fair, efficient and transparent and the reduction of
systemic risk. Full and fair disclosure is essential to investor confidence, and
promotes market liquidity and efficiency.
“Arms length relationships” are crucial for good customer relationships. This
promotes a more uniform method of serving the company’s clients based on set
procedures and standards. Preferential treatment is avoided thereby maintaining the
credibility and good reputation of the firm, especially in this industry where
reputation can make or break a business.
Arms length relationships also promote better control over one’s business thereby
ensuring that what is desired is in line with the views and mission of the company.
The client is less likely able to dictate the auditing procedures implemented by the
firm’s employees. Employees would not feel obligated to fulfill favors to clients
and in general, business like procedures would be upheld.
Arthur Anderson accounting firm had ingrained management practices which
facilitated transparent accounting and guided the firm in the past. A team of experts
known as the Professional Standards Group (PSG) made up of senior members
reviewed and passed judgment on the front line executives who audited client’s
accounts.
The front line “regional partners” were accountable to the Professional Standards
Group. However, Anderson allowed the regional partners the power to overrule the
PSG. This practice compromised one of the firm’s core principals of objectivity in
their financial reports and facilitated the possibilities for breaches in ethical and
moral decision making. Anderson became dominated by its large lucrative
corporate clients.
4:What is the logic of indicting an entire company for ethical failures rather than indicting
only the responsible individuals?

Answer:
The company is the principal and the individuals are the agents working on behalf of
the company. Such being the case, the logic behind indicting an entire company instead
of the individuals has to deal with an issue of corporate social responsibility (CSR).
Corporate social responsibility encompasses several core characteristics. The main ones
are the commitment of companies to contribute to sustainable economic development,
in collaboration with employees, their families and society at large, operating in a
manner that meets or exceeds the ethical, legal, commercial and public expectations of
society. In short, CSR is about how companies manage their business processes to
produce an overall positive impact on society.
On the basis of corporate social responsibility, companies should be made accountable
for the actions of its employees. When employees do great work, the companies benefit
by reaping profitable rewards. Very often, companies take most if not all of the credit
for great work done. On the flip side when employees commit wrong doings in the vein
of the company’s transactions some degree of responsibility must be borne by the
company.
If we were to put forward the Triple Font Theory (TFT) in ethical decision making to
the scenario, it may make the logic of indicting the entire company rather than the
specific individuals a bit more visible.
The Triple Font Theory identifies three sources or determinants of morality: the
moral object or end of the action, the subjective or personal intention of the action
and the circumstances including consequences.
In the case of Arthur Andersen, the moral object was the use of fraudulent and illegal
accounting procedures. The subjective or personal intention was to inflate the
revenues of Enron to make the company appear very profitable. The circumstances
include pressure from Enron’s executives and the lure of money or that big pay-off to
“ cook the books”. The consequences of the act(s) was the public scandal, the
bankruptcy of Enron and the destruction of Arthur Andersen’s accounting firm,
which all had far reaching impact since hundreds of people were left jobless.
According to the TFT, issues pertaining to rights and responsibilities are also to be
considered under the moral object since they directly affect the nature of the act.
Responsibility or duty is defined as the moral obligation to do or to omit something.
In the Arthur Andersen case, the executives defected on their moral obligation
(responsibility) when they engaged in fraudulent and illegal accounting practices.
The executives at both Andersen and Enron were at the helm of their respective
companies and had a great deal of power. This power was abused and misused to
facilitate their self-interests and greed. With great power comes great responsibility,
but that required level of responsibility was clearly not exercised. Due to the neglect
of responsibility, the sources of morality as based on the TFT were violated.
Conclusively, we can safely agree that by indicting the entire company a public
example is being made which serves as a deterrent for other companies to engage
in unethical practices. Indictment of the entire company sends a very strong
message that corporate social responsibility must be made a top priority and
practiced stringently and consistently for the benefit of wider society.
5 :Do you think the destruction of Andersen as a company was justified?

Answer:
Clearly understanding the logic of indicting the Andersen Company for ethical
failures it can be seen that the destruction of the company as a whole is not entirely
justified.
This is from the perspective that the actions of a few executive members of the
company had far-reaching impact, in that hundreds of innocent employees lost their
jobs, which in turn affected there personal lives. Individuals who have invested
their entire life as well as time into this organization have no benefits to acquire
such pension and health insurance. In addition, person’s dreams and aspirations
may be destroyed. Individual’s family life may be disrupted to large extents, since
the bread winners of theses home are now job less and their are no one to provide
for the family, also people houses and land may be lost because they cannot afford
to pay the various loans or mortgages that are required of them. In Andersen
Company, some employees were pressured by executives to perform the various
task and they conform in fear of dismissal from the company. Hence, one can see
that by destroying the entire company not jus t the wrong doers suffered but also
innocent person who knew nothing of what took place. It is unfair to these
employees since they have to face serious consequence for the actions of few
ethical executives.
There are some recommendations that could be use instead of the destruction of the
entire company. The Stock Exchange Commission together with the relevant
authorities should have indicted just the few executives who were responsible for
committing the unethical as well as illegal acts in an effort to safe guard the interest
and future of those innocent of the wrong doings. In addition, the courts could have
seized the properties of these individuals and liquidate where necessary and use the
funds to rebuild the company’s image as well as provide for the long term benefits
of the employees in terms of pension and health plans. Finally by prosecuting only
the individuals responsible for the act and not the entire company, as this will allow
Andersen the opportunity to recover from the public scandals and restore its
corporate image and thereby ensuring continuity of Andersen Company instead its
ruin.