presentation enron orapin
TRANSCRIPT
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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)