Enron's Collapse and Ethical Framework Essay Example | Topics and Well Written Essays - 2250 words

Enron's Collapse and Ethical Framework - Essay Example This was an eerie accounting policy that Enron came up with. Although the present earning look very appealing, but the profits earned today could not be shown in the future statements which made the future proforma financial statement looked a little weak.   Enron adopted another extremely innovative accounting policy of starting to make more future contracts in order to make financial statements of future years also look better. This created a never ending spiral and at the end of that spiral was destruction for the company. There were certain other accounting malpractices at Enron. They kept a debt of $600 million off book just to make sure that the financial statements of the company looked good. The reason why this practice is not encouraged is because it does not reflect the true accounting position of Enron.   Debt would have decrease the net value of the company, and share price would have come down. However, this action prevented this from happening and share prices of En ron’s stock remained constant. This is misleading because owners and investors were evaluating a company at a much higher price than the true value of the company.   This is an example of an open violation of truth and trust. Investors usually select the board of directors to make the long term policy for them. Directors hire managers to run the business for them. This shows divorce of ownership and control. This means that owners are not directly controlling the business, but they entrust it to their people selected.... There were certain other accounting malpractices at Enron. They kept a debt of $600 million off book just to make sure that the financial statements of the company looked good. The reason why this practice is not encouraged is because it does not reflect the true accounting position of Enron. Debt would have decrease the net value of the company, and share price would have come down. However, this action prevented this from happening and share prices of Enron’s stock remained constant. This is misleading because owners and investors were evaluating a company at a much higher price than the true value of the company. This is an example of an open violation of truth and trust. Investors usually select the board of directors to make the long term policy for them. Directors hire managers to run the business for them. This shows divorce of ownership and control. This means that owners are not directly controlling the business, but they entrust it to their people selected in the Ann ual General Meeting. These people than entrust the responsibility of day to day operations to managers. In this way, there is a series of trust contract being formed. Ethics of any action require that trust should not be betrayed and whatever happens truth should be told to the real owners who have trusted the directors with their responsibility. The first breach of trust in Enron case started when the directors started sending misleading reports to the owners to make the financial statements of Enron look healthy. This is open violation of truth and trust and shows that in the case of Enron there was a clear evidence of breach of trust. Another problem in this case is the abuse of powers from directors. They started a new system of accounting and started fooling the real

Article & Video Question Answers Essay Example | Topics and Well Written Essays - 250 words

Article & Video Question Answers - Essay Example This solution will however not be as simple and straight forward as has been explained and challenges as reduced incentives are to be expected and counteractive measures developed. Dr. Lewis’ idea is very theoretical and appealing, however, its practicality is problematic. One of the potential problems is the lack of winning of the small market teams even after being given all the incentives necessary. Their lack of winning will bring all the plans to a dead end as there will be no returns on revenue sharing and not investments forthcoming. The league may also not buy the idea of revenue sharing as their payroll and investments are still high. They may also not want to offset the competitive imbalance in existence as this puts them way higher on the category and they may not want to change that. Having investors on the small market teams even with a few wins is not guaranteed and this whole solution is unreliable. Lewis, Michael. Individual Team Incentives and Managing Competitive Balance in Sports Leagues: An Empirical Analysis of Major League Baseball. Journal of Marketing Research, October, 2008, vol. XLV, pp.