What makes the companies fail? Bad business practices and poor ethics, for sure, greatly contribute to failure. Such is the case with Enron and WorldCom. Much debate and criticism surround these two companies. As we have learned in the University clases over and over again, ethics is very important to company's success because ethical approach to business sparks investor confidence and consumer loyalty. In the long run, a company that is conducting business in an ethical way will enjoy greater prosperity. .
According to Florida Pace Action Report (February 9, 2002), Enron's most recent troubles can be traced to revelations in October 2001, when the company's bad accounting practices emerged. Massive amounts of unreported debt and losses incurred in non-energy and overseas energy partnerships established between Enron and other companies were disclosed. Amazingly, Enron kept debts and losses off its accounting statement for several years. When these debts and losses became known, the marketplace lost confidence in Enron. Shareholders rapidly sold their stock and credit agencies slashed the company's credit ratings. After all, who would trust a company that does not properly follow accounting standards when reporting income? "We are going to get to the bottom of the Enron debacle and those people responsible will be prosecuted," said Leslie Caldwell, head of the criminal division of the Justice Departments San Francisco office and leader of its national Enron Task Force. A jury convicted Arthur Anderson, Enron's accounting auditor, of obstruction of justice. Anderson was charged with destruction of tons of paper and thousands of computer files in an attempt to hide financial losses incurred by Enron. By the end of November .
2001, credit agencies had downgraded Enron's debt to "junk" status and shareholder selling had driven stock prices to their lowest. The article argues that financial analysts, economists, and regulators agree that Enron's fall as the result of investors and financiers pulling back after they lost confidence in the company.