Assignment 5

Assignment 5 - LEG 500 LAW ETHICS AND CORPORATE GOVERNANCE...

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LEG 500 – LAW, ETHICS, AND CORPORATE GOVERNANCE LEG 500 – Assignment 5 Research And Documentation Of Different Cases Dagmar Sousa Strayer University
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May 19, 2010 LAW 500 Introduction Money and greed are leaders in today’s businesses. Several companies are examples of how power and greed could bring big companies to ruin. Enron, Bernhard Madoff, and AIG are three examples of corporate leadership behaviors that have become synonymous with examples of corrupt and unethical business behavior leading to the destruction of consumer confidence in corporations and business. “It seems that no matter where we look today, the erosion of ethics and basic moral principles of right and wrong have taken us to the point whip here trust in our institutions and the very systems that make our society work are in imminent danger of oblivion. Perhaps at no time during the last two or three decades has business ethics, or the lack thereof, been of such paramount importance to the well-being of our business entities and country’” ( QUALITYDIGEST, 2009). Background Enron Enron was founded in 1985 to provide natural gas, electricity, and communication to their customers. The company grew into an energy company and had revenues over $ 100 billion in the year 2000, making Enron the 7 th largest company in the fortune 500. In 2001 Enron reported earnings of $754 million, a 35 percent increase in earnings from the previous year. By December 2001 the high flying company filed for bankruptcy protection in New York, releasing four thousand employees in the same month. In January 2002 the U.S. Department of Justice opened a criminal investigation into Enron’s internal corporate actions and behavior. Other 2
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May 19, 2010 LAW 500 erstwhile reputable corporations J.P. Morgan Chase, Citigroup, Merrill Lynch, Canadian Imperial Bank of Commerce, and Arthur Anderson were also involved and reputations tarnished by the Enron scandals. Enron’s business model and corporate culture encouraged people to take excessive risk which led some employees to break rules and the law. Using the concept of plausible deniability upper management was able to force subordinates employees to cover up problems instead of trying to work with upper management to find honest and open business solutions. Enron, using its reputation as the 22 nd best company to work for, recruited only the best graduates from the best Universities. Enron gamed the system and cooked the books. Taking advantage of lax external regulatory supervision, representatives of upper management at Enron, CEO Ken Lay, Jeffrey Skilling, CFO Fastow and his wife Lea Fastow, were able to entangle not only their own corporation but also the upper management teams at external legal firms of Vinson & Elkins, brokerage and investment firm Merrill Lynch, and auditor and accounting firm Arthur Anderson. Madoff
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Assignment 5 - LEG 500 LAW ETHICS AND CORPORATE GOVERNANCE...

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