Al Dunlap and Sunbeam – Paper 2

For this paper I wanted to focus on the company Sunbeam, who in 2001 filed for bankruptcy after fraud was committed at the company. In 1996 Sunbeam was encountering financial difficulties and brought in Al Dunlap to become CEO and Chairman. He went on to commit several serious accounting violations leaving Sunbeam in a severe financial crisis. Charges were eventually filed against Dunlap, and he was banned from ever serving as an director or officer of a publically held company. When Dunlap took over Sunbeam he orchestrated the appearance of massive losses in the prior year so that his takeover and performance could seem more profitable. In total, after their investigation was concluded the SEC said that almost $60 million of Sunbeams record setting profit of $189 million in 1997 was the result of fraudulent accounting. The Sunbeam fraud case remains in accounting curriculum as an example of how management is in an easy position to manipulate financial statements causing fraud. Like Enron, these loopholes have now been closed but the possibility of fraud within any company still remains.

So far I have used the following sources to research Sunbeam:

Within this paper I will draw some similarities to the Enron case that we have discussed in class, and I most notably want to focus on Deontology as my school of thought. I believe that Deontology fits best with the ethical violations that occurred at Sunbeam, and for my final paper I want to potentially focus on how even though many accounting loopholes have been closed that could be used to perpetrate fraud, it is still up to the ethical standards set by corporate leaders to determine whether or not fraud occurs. In this case there were both loopholes and poor ethical tone that led to Sunbeam’s demise. Deontology focuses on following professional ethics and/or an ethical code, both of which are present within the accounting profession. Since this is not an accounting class I will try to focus as little as I can on the overall accounting issues for Sunbeam, and focus on how a turnaround artist like Al Dunlap took advantage of stakeholder’s desires for high returns.

Here are some potential sources that I have looked at using:

As I discussed above I want my final paper to focus on how the ethical tone set by management either encourages or discourages fraud throughout a company. If there are executives who push relentlessly for higher profits (such as Ken Lay in Enron) then company employees feel less pressure to adhere to ethical standards. I will frame this within the stakeholder viewpoint, as a stakeholder centered mentality has the ability to encourage fraudulent activities.





4 thoughts on “Al Dunlap and Sunbeam – Paper 2

  1. Ian, I think this is a great case to talk about. With Enron, we have seen that the tone at the top of certain organizations can (and has) influenced employees/management to commit fraudulent acts. I remember learning about this case in a previous class and I am very interested in seeing what more you can dig up. Though this class is not an accounting class, it might be nice to cover some basic accounting background knowledge, so people understand what exactly happens when Sunbeam misstated revenue. More importantly, what happens when revenue and profits must be corrected–who is affected?

    I think this case is very important to tie into Enron because there might be substantial overlaps that you could highlight in your paper. In my paper (an accounting fraud paper), I know I will use Enron merely as a comparison or contrast, but nothing more than that. Also, in our audit class we learned that the accounting fraud triangle consists of rationalization, opportunity, and incentive, and I think your paper could benefit by discussing each of the factors and how it impacted various stakeholders.

    Best of luck on your paper! I believe the sources you have are a good start, but I’m also sure that accounting regulatory bodies have Sunbeam documents to look into, along with court documents as well.

    Liked by 1 person

  2. Good topic and good beginning.

    The Accounting Ethics book will probably have a chapter or two even more germane for this paper. Focus on them, and, perhaps, use a source the textbook cites as your main source.


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