Fall of Enron
Q1- Who were the key stakeholders involved in, or affected by the collapse of Enron? How and to what degree were they hurt or helped by the actions of Enron management?
Ans- The key stakeholders affected by the collapse of Enron were its employees and retirees. Stakeholders and mutual funds investors lost $ 70billion market value. Banks were also affected by the meltdown of the company. They included big banks like J P Morgan Chase and Citigroup. Not only the stakeholder and bondholder lose out, the confidence in the company also fell. This was the major setback for the company. The actions of Enron management left a deep scare for its 4000 employees which lost out their jobs and also impacted others around them. Some blamed Arthur Andersen; Enron’s accounting firm and some blame the board of directors for insufficient oversights. The damage was so big that it was likely to take years for the court to sort the wreckage. The company did not think of its future and took many bad steps just to earn money. The CEO should have looked into the company matters long time ago and took action so that hundreds of jobs could have been saved. The companies who were associated with the big firm were affected on a very large scale. This was the biggest bankruptcy of a firm with $63.4 billion in assets.
Q2- Considering all aspects of the case, what factor or factors do you believe most contributed to the collapse of Enron? In your answer, please consider both external and internal factors.
Ans –Enron’s non transparent financial statements did not clearly depict its operations and finances with shareholders and analysts. The company started manipulating the revenue figures. Enron used many methods to make the companies condition look better by starting different accounting practices. They also broke the legal and ethical integrity of the company by overseeing the company’s financial reports. Even supporting the political parties didn’t help them. They had a complex business
Ans- The key stakeholders affected by the collapse of Enron were its employees and retirees. Stakeholders and mutual funds investors lost $ 70billion market value. Banks were also affected by the meltdown of the company. They included big banks like J P Morgan Chase and Citigroup. Not only the stakeholder and bondholder lose out, the confidence in the company also fell. This was the major setback for the company. The actions of Enron management left a deep scare for its 4000 employees which lost out their jobs and also impacted others around them. Some blamed Arthur Andersen; Enron’s accounting firm and some blame the board of directors for insufficient oversights. The damage was so big that it was likely to take years for the court to sort the wreckage. The company did not think of its future and took many bad steps just to earn money. The CEO should have looked into the company matters long time ago and took action so that hundreds of jobs could have been saved. The companies who were associated with the big firm were affected on a very large scale. This was the biggest bankruptcy of a firm with $63.4 billion in assets.
Q2- Considering all aspects of the case, what factor or factors do you believe most contributed to the collapse of Enron? In your answer, please consider both external and internal factors.
Ans –Enron’s non transparent financial statements did not clearly depict its operations and finances with shareholders and analysts. The company started manipulating the revenue figures. Enron used many methods to make the companies condition look better by starting different accounting practices. They also broke the legal and ethical integrity of the company by overseeing the company’s financial reports. Even supporting the political parties didn’t help them. They had a complex business
Bibliography: - Updated case from wikipedia, Google and Wall Street journal.