ABSTRACT
Ethics in Advertising plays a critical role in the success of our businesses and our professionals. As we look back in recent history, and up to the present time, we find companies and their leaders and employees that have prospered, or suffered, from the consequences of doing, or not doing, the right thing for their customers and shareholders. Perhaps the greatest illustration of failure in this century is Enron and its accounting firm, Arthur Andersen. Enron began as an oil pipeline company that grew rapidly by acquiring and
dealing with other companies-such as energy producing entities-that Enron used to inflate its profits and share price. For example, it acquired an energy producing plant in California, and ordered it to shut down production for a period of time to cause Enron’s energy prices to go up. It constantly pushed its employees to continue to come up with growth proposals, even of questionable legal and ethical status, to push its profits. This included considering aggressive moves into businesses other than energy. Its stock prices rose dramatically because of the way in which it calculated
profits-not as current-but as “expected” future profits. While accounting firms are valued for independence in critical decisions, such as the stock
reporting method, Arthur Andersen totally went along with Enron’s illegal orders to do so. Arthur Andersen was the first accounting firm in history to be convicted, in 2002,
of a felony for its part in covering upwhat its client, Enron, was being investigated for by the Securities and Exchange Commission. The court found that Andersen professionals had destroyed documents critical to the investigation and that an Andersen lawyer sent an email suggesting changing a memo relating to earnings advice that had been given to the client. Enron’s legal problems involved conflicts of interest and false reporting of profits for its off-balance-sheet partnerships. Enron’s reported total assets in 2000 were $66 billion. The company had to restate those assets several times as the government investigation continued. “Enron’s downward spiral continued and on 2 December 2001, Enron filed for protection from creditors and became the largest corporate bankruptcy in U.S. history.”1
