Prior to the Enron scandal, the company was a Fortune 500 company and had been rated as “the most innovative large company in America” by Fortune. Enron had, in general, been one of the most profitable, powerful, and successful companies in all of America. However, it collapsed with terrible speed, leaving countless shareholders and employees in the rubble left from its downfall.
Enron had only been created in 1985, and in 2001, it filed for Chapter 11 bankruptcy, even though only six months or so before that point, Enron had been reporting tremendous profits.
Enron was an energy company, originally focused on the sale of natural gas. Much of Enron’s initial profits came from the deregulation of the sale of natural gas.
This trend culminated in Enron’s supposedly artificial creation of a power shortage in California. California de-regulated its energy markets in 2000, and then in the summer of 2000, it encountered a significant power shortage. This occurred again in 2001, ruling out the arguments made by many that it was the result of natural problems, as opposed to any sort of human or business manipulation.
Instead, in another incident that further emphasizes why Enron stands out as one of the most important business ethics cases in recent memory, Enron had worked with other companies to conspire to artificially create a power shortage, so that the prices for power would skyrocket, and Enron would profit substantially. Enron’s practices ignored the potential that citizens would be injured, and instead focused purely on the bottom line profits.
When the Enron bankruptcy scandal came to light, it supported all the suppositions that had been made against Enron and its unethical business practices. Enron had used faulty accounting practices to continuously portray itself as having been increasing in profits and overall value, while doing no such thing and instead digging itself deeper and deeper into a financial hole.
The fact that Enron had been perceived as a thriving company so shortly before needing to file for bankruptcy was the source of so much of the scandal, as no one had any warning of the company’s collapse before it happened. As a business ethics case, the scandal stands out as a major violation of any kind of reasonable business ethics standards that any capitalist business should adopt.