Organizations Promoting Business Ethics Article Review

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[. . .] There is a great deal that must be taken into account when developing and sustaining an efficacious ethics and compliance program. These sorts of services rendered by the ERC, make it simpler for business executive, HR leaders and ethics and compliance professionals to comprehend the information gathered from workplace surveys and ascertain the subsequent steps to overcome the identified challenges.


Research and summarize two scandals that impacted the business environment. Choose Fannie Mae, in J.P. Morgan. Write a two-page summary of your findings for each company. Support work with at least 2 sources

Fannie Mae Scandal

All corporations are expected to conduct ethical practices and business activities. The accounting scandal undertaken by Fannie Mae was one of the major unethical practices in the market. Fannie Mae together with Freddie Mac have a close association with the federal government. These are corporations that purchase big pools of mortgages and fund them in an attempt to diminish the cost of mortgaged for average low-income households. This is accomplished under a federal charter, owing to the reason that there is a mission for these corporations by the federal government to try and ensure that homes are affordable for the average citizen in the United States (Hume, 2004).

Fannie Mae, being a major housing corporation misinformed a huge number of investors regarding risky subprime loans. Together with Freddie Mac, these two corporations were sponsored and monitored by the government and ended up being involved in the subprime mortgage crisis scandal. Fannie Mae has had numerous unethical matters associated with the organization’s business loan practices. The corporation was progressively more engrossed in cultivating and safeguarding its homeownership agenda. In addition, the corporation employed extreme politicization and petitioning and largely depended on political contributors to support their mortgage notions and conceptions. In the end, the CEO of Fannie Mae, together with Richard Syrion, the CEO of Freddie Mac, ended up being fired and indicted with unethical business practices together with wrongful utilization of government funds. Furthermore, the actions of these executives significantly resulted in the 2008 financial crisis. Basically, Fannie Mae’s executive officers were in violation of the ethical codes of practices within the financial industry by being deceitful regarding mortgage circumstances faced by the entity.

The company’s financial disclosures demonstrated subprime issues that were substantially smaller as compared to the real results. Imperatively, these were fraudulent actions as they misdirected the real property market, giving rise to numerous investors purchasing homes and housing projects by means of mortgage financing. Notably, these houses being purchased by investors were offered at comparatively cheap and economical prices. These material misstatements took place in the course of a period of time of rising interest rates on mortgage or financial loans offered by financial establishments. Consequently, this had a major impact on confusing and distorting the market regarding the risk that lay ahead if the investors went on with their primary investment decisions. Fannie Mae and Freddie Mac played a key role in the housing market plunder, as they provided mortgage loans that failed to be in conformity with established standards (Hume, 2004).

The executive officers of Fannie Mae were unethical in regard to providing false information to the state regarding subprime loans. Consequently, both major investors and the general public had trust and conviction that it was less risky as compared to other prospective investment choices. The adverse effect of these unethical practices is that there was an unrelenting increase in housing credit, which facilitated the sustained expansion of the mortgage housing market up until its unexpected and precocious collapse. This adversely impacted numerous citizens. This is largely for the reason that in the course of the financial crisis, privately owned corporations were removing and redeeming themselves from the market whereas Fannie Mae and Freddie Mac were expanding their activities. As a result of increased interest rates on mortgage, a great deal of people ended up defaulting on loan repayment. This gave rise to numerous financial institutions to cancel the loans, plummeting the real property market into a financial collapse. These events climaxed to the financial crisis of the 2008 in the United States, which rapidly expanded and progressed to adversely impact other markets across the globe (Khan, 2004).

Enron Scandal

With regards to this case study of Enron, there are several aspects related to ethics which include omission or concealment of information and the confinement of organizations. In particular, in this case, the aspect of ethics comes in at the point where managers or individuals with leadership positions in the firm have go to make a decision between implementing what is beneficial to them individually or to the company as a whole. Ethics advocates for the responsibility towards the interests of the shareholders.

One of the ways in which the Enron case is related to ethics is the aspect the managers or executives consider and highly regard profits and financial matters at a higher level as compared to ethical matters. For instance, to begin with, the traders at the company unlawfully and illicitly influenced the energy prices in the state of California so as to produce revenues and proceeds for Enron. This would be done by creating power failures for power plants all over the state and as a result increasing the level of demand for power at a very fast rate. As a result, the energy prices increased and the company made huge profits. For instance, in the case study a trader is documented calling a certain power plant and telling them to cause power failure for a number of hours. This caused blackouts across the state and steeply rising prices and this made the traders laugh. Another aspect concerned with ethics is the manner in which Andrew Fastow, the Chief Financial Officer of Enron manipulated the financial structure of the company. Fastow created several companies and firms in order to conceal the level of debt that the company had and also to increase and augment the stock prices of Enron (Li, 2010).

At the top most level of the organization, Jeff Skilling who is the CEO of the company exploited and made the most out of accounting ambiguities and dubious procedure and processes to upsurge Enron’s profits. Simply because Skilling had been granted permission and given consent by the Securities and Exchange Commission to employ mark to marketing way of accounting, did not imply that it was ethical to do what he did. This form of accounting permitted Enron to documents and report revenues and proceeds from future transactions in the current financial statements. In a fiscal year, the company reported and documented fifty three million dollars in profit from a transaction with Blockbuster video just as they had declared it. However, the deal never actually went through and neither did the stated returns either. In as much as this way of accounting was deemed legal, Enron employed it in a manner that was not ethical (Petrick and Scherer, 2003).

Additionally, Skilling acted out of interests for himself and those in high levels in the company. This is because, once they has ensured the stock prices had increased greatly, they sold their shares and obtained great profit levels but left the consumer penniless. At the time when the stock prices of Enron kept falling, those in top management has already departed with profits. This was unethical as they should have safeguarded the interests of the shareholders or the owners. Additionally, the company has instituted an unethical organizational culture. At the outset of every financial year, the company gave rewards to the topmost employees that generated profit and did not bother or care how such profit was made and fired or sacked the bottom 10% of the workers who had the poorest profit returns (Healy and Palepu, 2003). As a result, the employees started to gamble and come up with unethical ways they could get away with just as long as they generated and brought in profit for the company. This scandal by Enron significantly rocked the accounting environment to the extent that it forced the need to generate new rules and regulations and this gave rise to the Sarbanes-Oxley Act (Nelson, Price and Rountree, 2008).


Go to, go to categories, and choose 2 articles of interest, provide a summary, Summary should include an abstract, 15 facts

Article 1


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Cite This Article Review:

APA Format

Organizations Promoting Business Ethics.  (2019, April 27).  Retrieved January 24, 2020, from

MLA Format

"Organizations Promoting Business Ethics."  27 April 2019.  Web.  24 January 2020. <>.

Chicago Format

"Organizations Promoting Business Ethics."  April 27, 2019.  Accessed January 24, 2020.