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Enron & Corporate Social Responsibility

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Where do you think Enron failed in its ethics and social responsibility toward its stakeholders? What according to you should be the top three points for the ethics and social responsibility policy for Enron to avoid the recurrence of the breakdown of ethical standards in Enron?

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According to Wikipedia.org (2010) the Enron scandal revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world; in addition to being the largest bankruptcy reorganization in American history at that time, Enron undoubtedly is the biggest audit failure. According to this site, Enron was formed in 1985 by Kenneth Lay after merging Houston Natural Gas and InterNorth; several years later, when Jeffrey Skilling was hired, he developed a staff of executives that, through the use of accounting loopholes, special purpose entities, and poor financial reporting were able to hide billions in debt from failed deals and projects; Chief Financial Officer Andrew Fastow and other executives were able to mislead Enron's board of directors and audit committee of high-risk accounting issues as well as pressure Andersen Accounting to ignore the issues.

According to Wikipedia (2010) Enron's stock price, which hit a high of US $90 per share in mid-2000, caused shareholders to lose nearly $11 billion when it plummeted to less than $1 by the end of November 2001? According to these authors, the US Securities and Exchange Commission (SEC) began an investigation, and the corporation Dynegy offered to purchase the company a fair sale price. When the deal fell ...

Solution Summary

This essay describes the unethical plight of Enron and how and what happened that caused shareholderes to lose nearly $11 billion. The essay also examines the consequences of the scandal in which new regulations and legislation were enacted to expand the reliability of financial reporting for public companies.

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Enron and Corporate Social Responsibility

By now, you should be very familiar with the Enron case. In this Module, we will evaluate the Enron debacle in the context of Corporate Social Responsibility. Specifically, socially responsible organizations behave in certain, ethical ways. Socially responsible organizations tend to go above and beyond the rules, mores, and expectations that have been established (and that are expected to be adhered to) by the general public, company employees, end customers, buyers and suppliers, and the government, for example. We will investigate the ways in which Enron defied the tenets of "socially responsible" behavior.
Required Reading
Read the following excerpt related to CSR. As you read, consider the benefits realized by socially responsible organizations, and how the leadership at Enron operated counter to CSR tenets:
Corporate social responsibility. (2013). International Institute for Sustainable Development. Retrieved from https://www.iisd.org/business/issues/sr.aspx
Assignment
Discuss how the Enron case informs our understanding of what it means for companies to be "socially responsible."
Keys to the Assignment
1. In the context of CSR, in what ways did Enron demonstrate - not social responsibility - but social irresponsibility? Consider how the company's actions ran counter to the tenets of CSR through its neglect of duty to the company's shareholders, its employees, and even the larger public trust. Be sure to cite specific examples.
2. What have been the long-term consequences of Enron's actions, and how did the company's implosion change our view of what it means for a company to be "socially responsible"?
3. Be sure that you use at least two other references from the library, and that you properly cite your sources.
Tips and Suggestions
Consider cause and effect when you discuss the longer-term consequence of the Enron case. Major corporate scandals - like the Enron scandal - most often result in increases in regulation, and in more oversight and scrutiny of other organizations. Consider, for example, how manipulation of the financial statements brought about vast increases in government regulation (e.g., Sarbanes-Oxley Act of 2002) and oversight of the financial reporting of publicly-held companies. Certainly, the Enron collapse spawned renewed attention to the efficacy of professional accounting standards and related-party transactions (and even Enron's "mark-to-market" accounting practices). Alternatively, you might discuss how the complicity of the company's auditors served to refocus the public's attention on what it means for auditing firms to be truly "independent."

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