How the Enron Scandal Could Have Been Avoided
How could the ENRON scandal been avoided?
The Enron scandal could have been avoided had they had an organizational culture of honesty, integrity and ethics
1. There should have been stronger management and better ethical oversight. Even employees should have had a sense of the expected ethical values and try to maintain a strong sense of organizational culture.
2. There should have been measures in place to oversee the activities of accounting firms (Arthur Andersen), as they acted as both Enron’s “Consultant” and “Accountant”. These two must be separate organizations as seen as a conflict of interest.
3. Enron should have been fair and honest to its partners and shareholders. Proper disclosures, accountability and transparency were not provided. Enron inflated profits to its members.
4. The alignment of employees goals- Enron employees values and preferred their self-interest to those of the stock and stakeholders.
5. The regulation of auditing – It should be a statutorily independent organization reporting.
6. CEO Jeffery Skilling made the company appear more profitable than it really was. He did this through “Market to Market accounting”.
Enron scandal could have been avoided if employees and management had a stronger ethical culture and if arrogance and greed weren’t dominant among management.
All organizations should take heed and put measures in place in avoid a situation like Enron.
- Examine your ethical climate and put safeguards in place
-Build a robust ethics infrastructure that is self-sustaining
-Publicly commit to being an ethical organization
-Separate auditing from consulting functions
-Talk with employees at all levels often
-Build ethical conduct into corporate systems
-Establish an Ethics Committee to constantly keep the seven main provisions of the Federal Sentencing Guidelines of 1991 in mind
-Keep the lines of communications open
The Enron scandal could have been avoided had they had an organizational culture of honesty, integrity and ethics
1. There should have been stronger management and better ethical oversight. Even employees should have had a sense of the expected ethical values and try to maintain a strong sense of organizational culture.
2. There should have been measures in place to oversee the activities of accounting firms (Arthur Andersen), as they acted as both Enron’s “Consultant” and “Accountant”. These two must be separate organizations as seen as a conflict of interest.
3. Enron should have been fair and honest to its partners and shareholders. Proper disclosures, accountability and transparency were not provided. Enron inflated profits to its members.
4. The alignment of employees goals- Enron employees values and preferred their self-interest to those of the stock and stakeholders.
5. The regulation of auditing – It should be a statutorily independent organization reporting.
6. CEO Jeffery Skilling made the company appear more profitable than it really was. He did this through “Market to Market accounting”.
Enron scandal could have been avoided if employees and management had a stronger ethical culture and if arrogance and greed weren’t dominant among management.
All organizations should take heed and put measures in place in avoid a situation like Enron.
- Examine your ethical climate and put safeguards in place
-Build a robust ethics infrastructure that is self-sustaining
-Publicly commit to being an ethical organization
-Separate auditing from consulting functions
-Talk with employees at all levels often
-Build ethical conduct into corporate systems
-Establish an Ethics Committee to constantly keep the seven main provisions of the Federal Sentencing Guidelines of 1991 in mind
-Keep the lines of communications open