ENRON Corruption Scandal

Video : ENRON Corruption Scandal

The Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the de facto dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world.

Causes of downfall

Enron's complex financial statements were confusing to shareholders and analysts. In addition, its complex business model and unethical practices required that the company use accounting limitations to misrepresent earnings and modify the balance sheet to indicate favorable performance.

Before its scandal, Enron was lauded for its sophisticated financial risk management tools. Risk management was crucial to Enron not only because of its regulatory environment, but also because of its business plan. Enron established long-term fixed commitments which needed to be hedged to prepare for the invariable fluctuation of future energy prices. Enron's bankruptcy downfall was attributed to its reckless use of derivatives and special purpose entities. By hedging its risks with special purpose entities which it owned, Enron retained the risks associated with the transactions. This arrangement had Enron implementing hedges with itself.

The Effect

Arthur Andersen was charged with and found guilty of obstruction of justice for shredding the thousands of documents and deleting e-mails and company files that tied the firm to its audit of Enron. Although only a small number of Arthur Andersen's employees were involved with the scandal, the firm was effectively put out of business; the SEC is not allowed to accept audits from convicted felons. The company surrendered its CPA license on August 31, 2002, and 85,000 employees lost their jobs. The conviction was later overturned by the U.S. Supreme Court due to the jury not being properly instructed on the charge against Andersen. The Supreme Court ruling theoretically left Andersen free to resume operations. However, the damage to the Andersen name has been so great that it has not returned as a viable business even on a limited scale.

Enron's shareholders lost $74 billion in the four years before the company's bankruptcy ($40 to $45 billion was attributed to fraud). As Enron had nearly $67 billion that it owed creditors, employees and shareholders received limited, if any, assistance aside from severance from Enron. To pay its creditors, Enron held auctions to sell assets including art, photographs, logo signs, and its pipelines.

In May 2004, more than 20,000 of Enron's former employees won a suit of $85 million for compensation of $2 billion that was lost from their pensions. From the settlement, the employees each received about $3,100. The next year, investors received another settlement from several banks of $4.2 billion. In September 2008, a $7.2-billion settlement from a $40-billion lawsuit, was reached on behalf of the shareholders. 

Conclusion

This scandal mostly were caused by the reckless human unethical behavior leadership. Leader help to establish the culture of an organization, and they set the example that others follow. Other employees in a business often take their cue from business leader, and if those leaders do not behave in ethical manner, they might not either. It is not what leaders say that matters, but what they do. From the cases above, Enron had a code of ethics that Kenneth Lay himself often referred to, but Lay's own action to enrich family member spoke louder than any words.

Environmental Issues

Video : The Haze Issue in Singapore

 Small and large-scale farmers in Riau province, Sumatra, have been blamed for the recent choking smoke smothering Singapore and parts of Malaysia. But scientists in Indonesia have added a third category of 'mid-level entrepreneurs'. These entrepreneurs buy unregulated access to land for oil palm and clear it by burning, seemingly unrestrained by government.

The Implications

Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight, warned that if the haze situation deteriorates for a prolonged period of time, the Singaporean economy will be negatively impacted.
"Singapore has been highly successful in creating its brand as a top class tourism destination, so it is particularly galling that these efforts are being eroded by the slash and burn techniques being used in Indonesia," said Biswas.
According to Biswas, tourism is a key contributor to the Singapore economy and generates 4 percent of gross domestic product growth directly, with around 14.4 million tourist visitors and S$23 billion ($18 billion) in tourism-related earnings in 2012.
"If the number of tourist visitors fall sharply for several months, this will hurt Singapore's GDP numbers for the third quarter of 2013, at a time when the manufacturing sector has already been adversely impacted by weak orders," he said.

Singapore 'has learnt 5 key lessons from haze crisis': Ng Eng Hen

Singapore will be even better prepared for the haze if it returns with a vengeance, said Defence Minister Ng Eng Hen, pointing to five key lessons learnt from the latest episode.
At a press conference last Friday to assess the recent haze crisis, he added that the authorities will continue to monitor the situation and fine-tune contingency plans.
Dr Ng, who heads an inter-ministerial committee to tackle the haze problem, said: "I think we are better prepared, both our people and agencies. If the haze does return we are confident that Singaporeans will take it in our stride."

1) Haze is a long-term issue
2) Better early warning system
3) Information management is key
4) The Singapore System is robust
5) Singaporeans are resilient

Conclusion

Environmental pollution issue often appear as a worldwide problem in a row with the advancement of the human life. This also related to the ethical issue which is have been arise when environmental regulations in host nations are inferior to those in the home nation. Many developed nation have substantial regulations governing the emission of pollutant, the dumping of toxic chemicals, the use of toxic materials in the workplace and so on. Those regulation are often lacking in developing nations, and according to critics, the result can be higher level of pollution from the operation of multinationals than would be allowed at home. From the above example environmental issue, it is caused by the other country but the consequences are most badly effects toward Singapore. So, it can be concluded that the root cause of this problem are from unethical behavior in organizational culture.