Downfall of Major Corporations

Memorandum

To: Professor

CC: [Click here and type name]

From:

Date: 31/03/2006

Re: What led to the downfall of some of the hugest corporations in America and how is it coped with?

CONFIDETIAL

In this report I will be talking about how businesses choose the road to greed instead

of choosing the ethical road. Some of the largest companies in the world fell to this type of

thinking, naming some such as Worldcom and Enron. But as stated in the article "business

ethics at work", There are huge ethical dilemmas plaguing the world today because it is very

hard to mix ethics and profits because the main focus of many businesses are to make a

profit for themselves and their shareholders. Also in "business Ethics at work", Around 70

percent of the managers and human resource experts surveyed around the world cited that

pressure is the primary factor in ethical breaches. Reason 2 is to further ones career and the

3rd is the desire to protect ones livelihood. So a lot plays into how some business choose the

low road, especially when Any time there is pressure to provide more than either a person is

capable of or more than a person is willing to do, there is a tendency to take shortcuts. We

will explore more into that phrase later.

Well, one of the most talked about and frowned about corporations of our time is

Enron(wall street a history from its beginnings to the fall of Enron). Enron was originally a

Houston based natural gas producing company. It expanded into the electrical utilities

market with the acquisition of the Portland general corporation. The merger was the first of

it's kind. They then started to become very aggressive in the merger market in the early

1990's. Growth was achieved through acquisition, they used mergers as their chief method of

research and development, preferring to but the expertise they needed rather than develop it

internally. These types of company's are known as serial acquirers. They even got the knack

of performing its own financial services as well, it hired its own merger specialist from wall

street and employed them rather then pay fees to the usual merger houses (company's that

mediate mergers for a fee). There company strategy is to become one of the most transaction

oriented non investment company in the world, acquisitions are part of the daily life of the

company. Within a short time, Enron became more of a trading company then a traditional

energy supplier, They became the 7th largest company in assets in the world. Their company

even had their own set of ethics which soon just turns out to be a bunch of words no one

listens to.( Enron Code of Ethics)

But even such a superpower house company had flaws, in 2002 the company went

bankrupt, the largest bankruptcy every filed in America. (The great Enron disappearing act:

who is responsible for the biggest business scandal in a generation? Where did all the money

go? Everyone from the public to Congress wants answers). You may wonder how a company

that was doing $100 billion a year trading contracts around the world went sour. They started

entering into derivatives, which are high risk contracts that allow an investor the right to buy or sell

something in the future for a fixed price. But too often Enron would guess wrong and lost

tons of money, so they fixed up subsidiary company's (company's under a parent(Enron)

company) to hide their poorly performing assets. It gave the misleading impression that the

company was more profitable then it really was. When the stock market started to slow, the

company's earnings started to implode. To make it even worst, Enron executives ere blowing

50,000 a month in company expenses, drove new cars to work every week, and they even got

a excuse from the Federal election commission to be excused from exception to a depression

-law which allowed Enron to hide losses in offshore firms, through donations do the

congress(bribe money). Also Arthur Andersen(When Enron sank beneath the waters of

bankruptcy in December 2001, the waves of scandal also overturned the energy giant's

accounting firm, Arthur Andersen, whose wholesale destruction of Enron-related documents

led to charges of obstruction of justice), the accounting