Transcript Business Ethics

Business Ethics
A Lacuna at some Companies
By
A V Raghu Vamshi 08IT-001
Aseem Sidhu
08IT-009
G Lakshmanan
08IT-012
Praveen Sebastian 08IT-021
Puneet Kukreja
08IT-022
Rishabh Garg
08IT-025
ENRON & WORLDCOM
Chapter 11
Sarbanes – Oxley
Act
FRAUDULENT
ACCOUNTING
PRACTICES
FAILURE OF
BOARD OF
DIRECTORS
PROBLEMS
MANIPULATION
OF FINANCIAL
STATEMENTS
Enron…The Scandal
• Mark-to-Market Accounting
– Once a contract is signed income is estimated as a
net present value of future cash flows. (The
viability of such contracts was doubted)
• Inflated Earnings
– Used off balance sheet items
• Board of Directors
– Inefficient
ImClone Systems & Qwest & Global Crossing
PROBLEMS
INSIDER
TRADING
ImClone Systems
• Martha Stewart
– Head of ImClone Systems
• Denial by the FDA
– A drug ‘Erbitux’ manufactured by ImClone
Systems was denied FDA approval
• Insider Trading
– Martha Stewart was accused of ‘Insider Trading’
as she sold a majority portion of the stock before
the news of ‘Erbitux’ being denied FDA permission
broke out
Global Crossing..something different??
• Inflated Stock Value
– The then president ‘Clinton’ awarding a lucrative
contract to the tune of 450 million $
• South heading Stock
– The contract was cancelled under the orders of
the new administration and the stock tumbled
• Different case of Insider Trading
– Winnick sold off many shares before the stock
plummeted
Stakeholders Affected
Suppliers
Regulators
Shareholders
Customers
Company
Distributors
Employees
Society
Creditors
How were the stakeholders affected?
• Shareholders
– Their personal wealth had evaporated
• Employees
– Their jobs had been confiscated
• Creditors
– Their trust and money had been nullified
• Regulators
– Their job had become much more tougher
Thank You..!