Presentation Enron Orapin

7/31/2019 Presentation Enron Orapin

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OVERVIEW:

Brief History About Enron

The collapse of the Energy Giant

Ethical Issues and Dilemmas

Lesson learned


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BRIEF HISTORY ABOUT ENRON

Enron was formed in the mid-1980s byKen Lay, from the former NorthernNatural Gas Co., a large interstatepipeline

It became the largest natural gas andelectricity trader in North America

Enron became the global market leader

in trading gas, electricity, broadbandand even weather-related derivatives

The company s earnings grew bydouble digits every year for many years


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GOOD OLD DAYS

The company s marketcapitalization approached $30billion in August 1999

Enron s market capitalization

exceeded $60 billion in September2000 after tripling net income; inApril 2000 EnronOnline handled$27 billion worth of transactions

Enron became the 7th largestcompany in America under Lay andSkilling, with a market

capitalization of nearly $70 billion


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THE DARK SIDE OF THE MOON


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Enron was a huge companythat faked their recordkeeping

(AKA "Books") to make itlook like they were growing

and hugely profitabletherefore attracting a lot ofinvestors.


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GUILTY PARTIES


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THE SMART MOVE

he executives knew about the problem, they sold thetock when the value was high, made billions

ollectively. After they sold their stock, the price crashed,nd the families lost out.


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ETHICAL TABLE

Name Virtues(+) orVices(-)

Morally Right ( ) orMorally Wrong ( )

Kenneth -

Jeffrey -

Andrew -

Sherron +


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There is nothing wrongwith borrowing andbeing in debt in business world.

Economic growth hinges on growth in nominal in contrast to realresources.

For example :

A $1 can lead to business of $100, 100 times of real resources.

The problem is :The percentage of debt (out of asset) : Enrons debt is 75% of its stockmarket value. Can the debt be manageable ?


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Enron covered up the debt under the separate

accounting financial statements of the

Special

Purpose Entities :Benefit:

Growth of business : growth of asset value : rise in Enrons share

price : rise to shareholders income.

So long as the share price does not fall, the growth ofbusiness canbe tremendous, but such cover-up sows the seed of hidden disasteras the asset value of business depends primarily on the investors

**confidence & integrity of CEO & executives.


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Inflating the market value of Enron :deceiving

investors, shareholders & the USgovernment :That is why, after Enrons collapse,

President Bush signed into law the

Sarbanes-Oxley Act addressing corporateaccountability.


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What Enron has done :

A. Engaged in unhealthy heavy borrowing and the dishonest

practice of the CEOs :unacceptable.

B. Deliberately inflating the future cash flow : deceiving the

business partners.

C. By collaborating with the accounting firm, Arthur

Anderson, in providing false financial statements to

shareholders, investors, the public & the US government,

Enron is immoral.


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Rights : as the moral standard :

Rights :Enrons shareholders are entitled to have

the dividends and capital gain.

Their income dissipated as a result of the collaboration betweenEnron and Arthur Anderson, the cover up of debt and the lack ofintegrity of the CEOs.


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Corporate Social Responsibility :

Assumptions :The Enron share price did not fall.

Enrons accounting practices were allowed by the

generally accepted accounting rules.

Enron should have taken up the socialresponsibility of providing a fair healthybusiness environment, benefitingshareholders, investors, government,pensioners, economic growth & USA as awhole.


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From the perspective of ethics of virtue :

Ethics of virtue :

Ethics is not just concerned with actions,but also the development & assessment of

character.Enron :

When the interest of CEOs & the businessconflict with limited resources facing Enron,

the executives acted immorally.


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ETHICAL PERSPECTIVE

LESSONS THAT WE CAN LEARN FROM ENRON


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LESSONS THAT WE CAN LEARN FROM ENRON

SCANDAL


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CONCLUSION

The tale of Enron is a story of human weakness, ofhubris and greed and rampant self-delusion : of

ambition run amok ; of a grand experiment in the

deregulated world ; of a business model that didnt

work ; and of smart people who believed their nextgamble would cover their last disaster--and who

couldnt admit they were wrong.

Quoted from Bethany McLean and Peter Elkind :The Smartest Guys In The Room :The Amazing Rise And Scandalous

Fall of

Enron (2004)

Presentation Enron Orapin

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