Bad company corrupts good character and morals.
People can be blind when it comes to love, ego, greed, envy, fear, and imitation. Failure, too, comes from that. Let me be the whistleblower of a crooked company that took a walk in Wall Street and shook it to its core.
This company’s faulty and corrupt business practices led to its collapse and straight to bankruptcy – not only affecting the company and its members, shareholders, and suppliers but also the lives of thousands of employees and people who put their trust in them. Additionally, this incident brought up a revolutionary legislation called Sarbanes-Oxley Act of 2002 (SOX) especially designed to prevent similar corporate failures and accounting scandals.
While most corporations could likely identify their weakest point, there have been cases in corporate history where the management team has been so bad that it chooses to hide the fact their overall business is falling apart faster than they thought. The senior executives believed that they had to be the best at everything it did and that they had to protect their reputations and their name as the most successful executives in the U.S. With their ego, passion for wealth, and implemented actions, we found a corruption in the form of accounting fraud, dishonest practices, and malfeasance. This particular company thought they could get away from it, but time always tells the truth.
This company demonstrated a need for significant reform in accounting and corporate governance, as well as for a close look at the ethical quality of the culture of business generally.
This business was already crumbling, but it never got too serious till the year 2001 where the CEO thought of a way to hide the financial losses of the trading businesses and other operations of the company by using a strategy called “mark-to-market accounting.” This strategy, by definition, is a tool that can change the value on either side of a balance sheet, depending on the conditions of the market (The Economic Times, 2016). This can work well for securities, but it can be disastrous for other businesses. In this company’s case, the company would build an asset and immediately claim the project gained profit on its books, when really, it hadn’t made a single cent from it. Instead of admitting and taking in the loss from the failed project, the company, by the orders from the CEO, would transfer the assets to an off-the-books corporation where the loss would go unreported. This type of accounting enabled the company to write off a load of losses without hurting the company’s bottom line – the company succeeded with this strategy or plan for a few years, making the company appear to be in great shape despite the fact that many of its projects and subsidiaries were losing money. Much of the company’s balance sheet, however, did not make sense to analysts. The Securities and Exchange Commission had begun a full investigation into the company and the partnerships.
Another major reason why this company managed to enjoy years of successful deceiving and cheating was its practice of defective corporate governance. Basically, Corporate Governance entails the system of rules, regulations, practices and processes by which a company is directed and controlled by the means of internal control and external cross-examination (audit) to ensure balance, fairness, accountability for the protection of interests of all the concerned stakeholders. But the corporate governance practiced in this company they were very far from the very definition of Corporate Governance.
Additionally, the leadership style was said to be “cult-like” – where in they were devoted to the CEO. He was a macho, aggressive and exceptionally smart and liked, preferred and hired people like himself. It was under his leadership that the devastating culture developed in the company.
The company’s failure represents the biggest business bankruptcy ever while also spotlighting corporate America’s moral failings. It’s a stark reminder of the implications of being seduced by charismatic leaders, or more specifically, those who sought excess at the expense of their communities and their employees (Silverstein, 2013). In the end, those misplaced morals killed the company while it injured all of those who had gone along for the ride.
The company’s time has long ended. But its lessons will long endure.
“It’s good to learn from your mistakes.
It’s better to learn from other people’s mistakes.”
A reputation to a business is important for when it is lost, it would be difficult to rebuild. All businesses should have ethics and morals to guide them on how to behave. Some ethics that should be put up in businesses are: Honesty, integrity, loyalty, keeping a promise, fairness, care, respect, morale, accountability. To gain all those back from investors, customers, suppliers, and the government, the business should first give and show it.
A company that works ethically is also less at the risk of being fines for poor behaviour and less likely to find themselves in any governmental problems. Company’s that deal ethically allow investors’ a peace of mind that their money is being used in a way where there is moral standings. Being in a company with strong business ethics makes employees comfortable and gives them security. Additionally, customers are at ease when buying products or asking for service from a company they know to source their materials and labor in an ethical and responsible way. Maintaining promises it has made is crucial to keeping a good reputation.
Growing up with business blood injected in me and being surrounded by business men, I learned a lot more than I would have on my own. I believe it’s better to be alone than with a bad company. My father, the CEO of Smarthome Digitcome, started off as a sole proprietor but later decided to turn into partnership with other company’s. He taught me that it is difficult, but not impossible to conduct an honest business. He noted that as long as greed is stronger than compassion in a business, there will always be suffering.
I believe businesses shouldn’t just be about profit, but rather about the benefit for the whole community.Businesses should stop looking at the narrow views and only maximising profit, they should look at things in a broader perspective. A business that makes nothing but money is a poor business. Just like Peter Ducker, a management consultant, stands with it and said, “Profit in a business is like oxygen to a person, if you don’t have enough of it, you are done. But if you think your life is only about breathing then you’re really missing something.”