Solved: Assignment 9 Movie-   Enron: The smartest guys in the room

• 00:30-02:30 INTRODUCTION​
• 17:30-27:55 SKILLING​
• 32:00-1:03:10 ENVIRONMENT​
• 1:28:00-1:38:00 WATKINS/BANKRUPTCY​

1. Unethical behaviors which are documented in the film.
2. Factors in the firm’s environment (opportunities, threats) which may have contributed to the unethical behaviors documented in the film.
3. Factors internal to the firm (resources, especially weaknesses) which may have contributed to the unethical behaviors documented in the film.
4. Attributes of specific individuals which may have contributed to the unethical behaviors documented in the film.

• Faulty oversight, enabling the unscrupulous pursuit of personal gain and other selfish interests. People who are obsessed with wealth accumulation, greed, power, status, and other selfish interests often push ethical principles aside in their quest for selfgain. Driven by their ambitions, they exhibit few qualms in skirting the rules or doing whatever is necessary to achieve their goals. A general disregard for business ethics can prompt all kinds of unethical strategic maneuvers and behaviors at companies. The U.S. government has been conducting a multiyear investigation of insider trading, the illegal practice of exchanging confidential information to gain an advantage in the stock market. Focusing on the hedge fund industry and nicknamed “Operation Perfect Hedge,” the investigation has brought to light scores of violations and led to more than more than 70 guilty pleas or convictions by 2015. Among the most prominent of those convicted was Raj Rajaratnam, the former head of Galleon Group, who was sentenced to 11 years in prison and fined $10 million. At SAC Capital, a $14 billion hedge fund, eight hedge fund mangers were convicted of insider trading in what has been called the most lucrative insider trading scheme in U.S. history. The company has agreed to pay $1.8 billion in penalties and has been forced to stop managing money for outside investors.
• Heavy pressures on company managers to meet or beat performance targets. When key personnel find themselves scrambling to meet the quarterly and annual sales and profit expectations of investors and financial analysts or to hit other ambitious performance targets, they often feel enormous pressure to do whatever it takes to protect their reputation for delivering good results. As the pressure builds, they start stretching the rules further and further, until the limits of ethical conduct are overlooked. Once people cross ethical boundaries to “meet or beat their numbers,” the threshold for making more extreme ethical compromises becomes lower. In 2014, the U.S. Securities and Exchange Commission charged Diamond Foods (maker of Pop Secret and Emerald Nuts) with accounting fraud, alleging that the company falsified costs in order to boost earnings and stock prices. The company has agreed to pay $5 million, while its (now ousted) CEO must pay $125,000 to settle a separate charge of negligence and return $4 million in bonuses to the company. The real blow for the company was that its pending acquisition of potato chip giant Pringles fell apart as a result of the scandal, thwarting the company’s dreams of becoming the second-largest snack company in the world.
• A company culture that puts profitability and good business performance ahead of ethical behavior. When a company’s culture spawns an ethically corrupt or amoral work climate, people have a company-approved license to ignore “what’s right” and engage in most any behavior or employ most any strategy they think they can get away with. Such cultural norms as “everyone else does it” and “it is OK to bend the rules to get the job done” permeate the work environment. At such companies, ethically immoral or amoral people are certain to play down observance of ethical strategic actions and business conduct. Moreover, cultural pressures to utilize unethical means if circumstances become challenging can prompt otherwise honorable people to behave unethically. Enron’s leaders created a culture that pressured company personnel to be innovative and aggressive in figuring out how to grow current earnings—regardless of the methods. Enron’s annual “rank and yank” performance evaluation process, in which the lowest-ranking 15 to 20 percent of employees were let go, made it abundantly clear that bottom-line results were what mattered most. The name of the game at Enron became devising clever ways to boost revenues and earnings, even if this sometimes meant operating outside established policies. In fact, outside-the-lines behavior was celebrated if it generated profitable new business.