In the course of this report, it will show the comparison of the ethical aspect of two well-known corporate giants, Enron and Bernie Madoff. The first subject Bernard Lawrence “Bernie” Madoff, Broker, Investment guru, Financier. Once herald as a financial king, he in his reign overnight turned white collar criminal, which led to a quick and easy demise. Second, Enron Corporation, known for energy and commodities, services, and well known for being a major player in the electricity and natural gas, and communication, pulp and paper company, crumbled to its knees into bankruptcy in the early 2000s.
The question is, at the height of both these two companies, what went wrong. Where was the ethical breakdown? The who, what when and the why will be the focus of this report. Bernie Madoff, former chair of NASDAQ, started his parent company on Wall Street Bernie L. Madoff Investment Securities LLC, 1960 it was as the top of its game-bypassing firms who were specialist in the field of finance. Hijacked by Madoff’s firm with their signature OTC…Over the Counter orders with brokers.
The company employed family and close friends that comprised of his brother Peter, Managing Director, his niece (peter’s daughter) Shana Madoff, compliance officer and attorney, and his two son’s Mark and Andrew. It was told by Madoff’s sons that their father made damaging statements, and confessed to them that the business was a lie, that it was a Ponzi scheme from the beginning, which led Federal agents to arrest Madoff, and all those involved. Madoff told authorities that the scheme began in 1990, but according to the FBI, it was started early as the 1970s.
It has been reported that Madoff’s trial of deceit led his scheme to accumulate as much as $65 billion, with a reported estimate loss to investor of $18 billion. “Reports of ethical violations by upper level managers continue to multiply despite increasing attention being given to ethics by firms and business schools. Much of the analysis of these violations focus on either these manager’s lack of operation principles or their willingness to abandon principles in the face of competitive pressures” (Ludwig, 1993). Enron Corporation is the second in this detailed report of the fall of power.
Traded on the NYSE: ENE, and based in Huston, Texas was an energy, commodities, and services company. For six consecutive years, Enron was named by Fortune Magazine as “America’s Pioneering Business”, with claimed revenues of $101 billion in the year 2000. What do most companies base their ethics upon; Enron’s code was one of Respect, Integrity, Communication and Excellence, described as treating others as they would be treated. Apparently they did not abide by that one in particular because as we go through this report, it will soon show the where the breakdown began.
Integrity, working along with customers through honesty, Communication, obligated to interconnect with one another, Excellence, Not accepting anything less than the best in all that we do. These are just a few statements from Enron’s code of Ethics handbook. Given this code along with the assurance to professional ethics, it causes one to ponder these questions. How could a company dramatically collapse with reported revenues of $101 billion? With an increase the first, three quarters in 2001, falling into major bankruptcy in December of that same year.
Could it be that the answer to these questions is a failure of the top leadership, a corporate culture caused the demise in its ethical beliefs along with the complicity of investors and the financial institutions? Enron’s corporate culture is described as having an appearance of arrogance that caused the public to trust that they could handle the risk without stumbling upon any danger to the company and to investors. This type of thought would make one not to sleep at night, but the implicit message from Enron was make the numbers, if you are caught stealing or cheating, ask for another chance, you may get one.
You can see that Enron did not do anything to promote integrity nor respect; it was undermined by the company’s emphasis on reorganization, presentation, reparation and its considerations. To conclude, the answer as to why CEO’s have bilked their companies and investors out of billions of dollars and brought a collapse of hundreds of corporate giants, it is because unethical and criminal behavior is the morals by which they do what they have done are doing, even as this report is being written.
An epidemic could explode and if nothing is done about it…then the American system of High Finance and Big Business will crumble to a screeching Holt and affect this country’s economy…. God forbid. “Destructive leaders can cause hardship not only to immediate followers, but to the broader population. For example when a large company struggles financially, it is not only employees, but customers, suppliers, and shareholders that are negatively affected. The cognitive processes employed by the leader play a large role in how he or she gathers information, interprets it, and makes decisions toward a course of action (L. Eubanks, 2010).