Ethical Analysis
Kimberly Kendrick
MBA/5310
January 29, 2014
Mr. Van Buskirk

Ethical Analysis The problem with scams is that you never know until it is too late. People who obtain money from dishonest means could spend the course of a lifetime and never pay stakeholders back. Stakeholders and shareholders alike are in a uniquely vulnerable position which becomes clear in most business schemes (“The Biggest Stock Scams of all Time”, 2011). Corporate scandals for over a decade serve as a reminder of the inability shareholders have to effectively control management and its owners in business. In the Enron, World Com, and Tyco disasters for every employee whose job was displaced another shareholder lost on average $4 million. Enron continued to exist under Chapter 11 protection until 2004 until assets where liquidated to pay off debtors. Prior to the debacle this company was the seventh largest energy company in the U.S. based out of Houston. The controversy arose when Enron allowed investors to be fooled into thinking the company was stable keeping hundreds of millions of debt off of its books. Shell companies that were run by the organization recorded fictitious revenue giving the illusion of unbelievable earning figures ("The Biggest Stock Scams of all Time”, 2011). This deception eventually unraveled causing share prices to dive an example of their inability to use market ethics and allowing greed to overtake their common sense and use of principles (Gauthier, 1986). Soon after Enron rocked the nation with the discovery of its scandals telecommunications giant World Com came under scrutiny. It was discovered that this corporation was “cooking the books” recording office supplies as operating investments capitalizing on the cost of these items for years. The company used this accounting trick by exaggerating profits while expenses were being accrued making the company appear to be worth over a billion dollars. During this time business was becoming increasingly unprofitable, investor watched as shares plummeted from $60 to less than .20 cents. People most affected by the organizations downfall where the employee’s stakeholders in which ten of thousands of their jobs were lost. This incidence displays a lack of organizational ethics the similarities to Enron are that greed was a factor in the downfall of both. Self-interest played a part in the acts of each perpetrator not realizing or caring about the people who would be affected ("The Biggest Stock Scams of all Time”, 2011). Tyco a manufacture of health care, safety equipment, and electronic components ensured stakeholders that 2002 would be a good year for stocks. The CEO had previously been named one of 25 top corporate managers by BusinessWeek. Dennis Kozlowski later was reported siphoning money from Tyco in the form of fraudulent stock sales and unapproved loans. Kozlowski along with other business executives took the company for upwards of over $450 million further supporting their lavish lifestyles. This caused Tyco’s share price to decrease over the course of six weeks 80 percent. The group was sentenced to 25 years in prison ("The Biggest Stock Scams of all Time”, 2011). In comparison these cases have similarities in which the same ethical principles can be applied. The disclosure rule, market ethics, organizational ethics, and also intuition ethic should have been taken in account for each issue. Ethicist speculate that it is correct to associate agency theory with the analysis that people act completely cunning and deceitful even when its not necessary, but whenever it is advantageous for them to do so which perhaps explains each of these sandals (Hausman & McPherson, 1996).

References Daniel M. Hausman and Michael S. McPherson, Economic Analysis and Moral Philosophy (Cambridge: Cambridge University Press, 1996) David Gauthier, Morals by Agreement (Oxford: Clarendon, 1986), p. 7. The Biggest Stock Scams of All Time. (2011). Retrieved from http://www.investopedia.com