Enron A Case Study of Failed Business Communication †Free Samples

Question: Discuss about the Enron A Case Study of Failed Business Communication. Answer: Introduction The organizational structure is based upon few aspects, business communication is one the significant ones. Effective business communication is crucial from in every parts of the organizational structure. The conversation between the leadership and the employees to the information sharing it is integral. Proper business communication skills are needed to organizing, reporting, sharing values, setting principles, instructing, supervising, delivering guidelines and managing the overall activities of the company, effective business communication is absolutely necessary ( Brownell 2015). The failure of which has caused many recent corporate scandals. Enron scandal is one of the biggest ones. It has brought the alarming issue in the surface of the business world. The success can never be achieved or the established reputation can be destroyed if the ethical codes or principles of the company are not communicated and practiced properly. Background During the 1990s Enron was one of the most successful e commerce companies of America. The building of powerful power plants, gas line operations and the innovative trading business made them achieve great success in a short period of time and which they continued for a long time until 2001 (Edmonds 2017 ). They pioneered in creating a business for unconventional products like the weather future, broadcast time or internet bandwidth. The stock market transformation because of the blooming of computer technology and the companys adaptability power helped it to leave the competitors behind. Enronwas accredited with the position of 7th largest company onthe Fortune 500 of 2001 (Fortune.com 2017). This actually made its failure to be such a massive one. In the following section the report tries to analyze the possible reasons that caused such a failure. The collapse The journey from 140 billion in 2001s first half to bankruptcy in December, 2001 was quick for the company (Weiss 2014). Enron announced that they are experiencing huge loss, as the income they published was a lie. In reality it lost few billions. The company had created few fake companies who they became partners to hide their debt and losses. Arthur Anderson was responsible head of the company who was dealing with the audits of Enron (Brody and Perri 2016). He completely failed to realize or consider the potential problems. Anderson and his auditors are even accused of getting involved in the unlawful act. The company threw away thousand hardworking employees and betrayed thousands of investors. Company lost billions of dollars which resulted in almost zero shares. Enron finally announced their bankruptcy. 10 congressional committees and 2 federal agencies are investigating the case (Edmonds 2017). Reasons of failure The ethical failure of the topmanagement of the company results in such big failure. The former treasurer of Enron Ben F. Glisan and former chief financial officer Andrew Fastow were engaged in conspiracy, fraud and money laundering (Aven 2015). Fastow was also engaged in the fake partnering and wire fraud, like Merrill Lynch aided power plants in Nigeria and Brazil (da Silveira, 2013.). 64 pages long Enrons Code of ethics was based on effective business communication, integrity, respect and excellence (Micklethwait and Dimond 2017). However it failed miserably while getting implemented in reality. According to Sherron Watkins, Enrons top leaderships and employees were encouraged to practice ethical misconducts as long as the number was growing and they were not getting caught. Popular Wall Street firms like Citigroup or J.P. Morgan were involved with the company as they strategically used the prepay method (Markham 2015 ). This way the company took loans as the cash flow and used new prepays to balance the current ones. Many inappropriate actions were taken by various top levelmanagement in the company for a long period. However the investors, stakeholders and subordinates were unaware of them. Enron leadership was getting help from high administrative while practicing frauds. Managers consciously overlooked accounting misconducts, the top level managers of the company donated large amounts in the American political campaigns and deregulation in the energy business were few other factors that ensured the disaster. Analysis: Ethics in Accounting Ethical accounting deals with moral practice of preparation, presentation and revelation of financial information. The ethical practice demands fair account management, error free auditing and genuine reporting mechanism. Success of organizational structure is built upon ethical practice by leaders and employees. However, often the management encourages the subordinates to compromise with the ethical practice and they themselves engage in such practice just to ensure more profit. The ethical failure has caused collapse of several large organizational structures. Enron was one of the first ones that brought such incident in foreground globally. According to Copeland, Enrons failure is largely caused by the ethical misconduct in the accounting and auditing (Copeland 2015). (Source: Bonaci et al. 2013) Corporate Governance The corporate governance system is mainly based on the relationship between accountants and the stakeholders. They should practice a transparent and faithful behavior with the stakeholders while exchanging the information. The corporate governance principles are mainly the confidentiality, proficiency, objectivity and integrity (Tricker and Tricker 2015). International Federation of Accountants has suggested a Code of Ethics for the corporate governance to act ethically (Bonaci et al. 2013). Instead of companys own code of ethics they should follow a globally standard one. Recommendation The scandal has shaken the business world and the society in such a way that new laws regarding the business misconducts might be implemented in the business. The companies have many things to learn from the scandal. However this report tries to explore few recommendations to fight against such occurrences. The companies must encourage the accounting professionals in the ethical practice. The ethical practice in the accounting creates the ethical leaders who will ensure the successful business in the long run. The company should provide the employees with effective training in ethical codes and conducts. The education focusing on the ethics can be the most effective way to deal with the ethical misconducts from its core. Conclusion The fall of Enron highlighted the lack of ethical practice in business world and the need of relevance of ethical practice in the internal control of the corporate governance. The outcomes demonstrate the fate of investors money flow. The code of conduct was highly acclaimed on paper but the management never actually implemented those in reality. The company also failed to generate a working culture that embraces employee efficiency, integrity and honest way to achieve productivity. References Aven, B.L., 2015. The paradox of corrupt networks: An analysis of organizational crime at Enron.Organization Science,26(4), pp.980-996. Bonaci, C.G., Strouhal, J., Mllerov, L. and Roubckov, J., 2013. Corporate Governance Debate on Professional Ethics in Accounting Profession.Central European Business Review,2(3), p.30. Brody, R.G., Brody, R.G., Perri, F.S. and Perri, F.S., 2016. Fraud detection suicide: The dark side of white-collar crime.Journal of Financial Crime,23(4), pp.786-797. Brownell, J., 2015.Listening: Attitudes, principles, and skills. Routledge. Copeland, M.K., 2015. The importance of ethics and ethical leadership in the accounting profession. InResearch on Professional Responsibility and Ethics in Accounting(pp. 61-98). Emerald Group Publishing Limited. da Silveira, A.D.M., 2013. The Enron scandal a decade later: lessons learned?.Browser Download This Paper. Edmonds, P. (2017).NPR : Fall of Enron. [online] Npr.org. Available at: https://www.npr.org/news/specials/enron/ [Accessed 30 Jul. 2017]. Fortune. (2017).Enron. [online] Available at: https://fortune.com/fortune500/2001/enron-7/ [Accessed 30 Jul. 2017]. Markham, J.W., 2015.A financial history of modern US corporate scandals: From Enron to reform. Routledge. Micklethwait, A. and Dimond, P., 2017. Enron: Launch to Boom and Bust, 19852001. InDriven to the Brink(pp. 15-38). Palgrave Macmillan UK. Miller, S., 2017. The Ethics of Whistleblowing, Leaking and Disclosure. InThe Palgrave Handbook of Security, Risk and Intelligence(pp. 479-494). Palgrave Macmillan UK. Tricker, R.B. and Tricker, R.I., 2015.Corporate governance: Principles, policies, and practices. Oxford University Press, USA. Weiss, J.W., 2014.Business ethics: A stakeholder and issues management approach. Berrett-Koehler Publishers.