The Ethical Erosion- Enron

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The Ethical Erosions and Solutions A company according to The Companies Act 2006 is different from partnership and sole trader. There is more than one owner of the business and the liability of its members, the shareholders, is limited to the investment made in the company. This concept is commonly known as the concept of Separate Legal Entity. Since there is more than one owner, the ownership gets diluted, with diversified interest groups and therefore the need arise to separate management from its owners. The management of the business includes a group of professional staff chosen by the shareholders on the basis of their expertise, experience and knowledge of the business. The management owes the responsibility of working in the best interest of the owners of the company and therefore is the steward of the shareholders’ investment. This establishes an agency relationship, presuming shareholders to be the principal and managers the agents of the shareholders. Enron Corporation, a company with humble beginnings, started as a merger of two Houston pipeline companies, in 1985. It was universally considered one of the United State’s most innovative companies. Although it faced a number of financially difficult years, the company managed to survive. “By 1988, the company redefined its business from “energy delivery” to “energy broker” and therefore changed from a surviving company to a thriving one” (Sims & Brinkmann, 2003). Besides buying and selling gas and electricity futures, it created whole new markets for such oddball “commodities” as broadcast time for advertisers, weather futures, and internet bandwidth (Li, 2010). The business community rewarded Enron for its cleverness and ethicalness and this encouraged its executives to sustain the exponential growth. Employees were forced to stretch the rules further and further until the limits of ethical conduct are

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