Few business episodes have been the subject of so much debate and despair as the swift descent of once-admired energy trader Enron. The saga of this firm, which rose to prominence as rapidly as it subsequently fell, serves as a kind of morality tale of corporations, regulators, and investors. As we have discussed in class, the tragic effects of Enron’s overreaching arrogance provide a textbook example of both the best and the worst of American business culture and practice. Although the catastrophe’s complete impact may never be completely determined, it seems likely that Enron’s collapse caused more than one major company to cease to exist, several industries experienced radically changed environments, regulators and investors modified their behavior, and all firms are now subjected to greater scrutiny and regulatory oversight. So how did one of the brightest stars of American…
References: Dharan, Bala G.; William R. Bufkins (2004), Enron: Corporate Fiascos and Their Implications, Foundation Press, ISBN 1-58778-578-1…
Enron senior management gets a failing grade on the truth and disclosure and a passing grade on arrogance and greed. For Fifteen years Enron was a paper tiger with few questions ever asked concerning its earnings profitability or business practices. The deceit and deception by Enron management seems to be the environment of a divisive marketing campaign that Kenneth Lay, Jeffery Skilling and Andrew Fastow hide while touting Enron. In reality Enron was one of the greatest Ponzi schemes to date, all hat and no horse. The management was superb at financial fraud and unparalleled at persuading the public and investors that they were respectable and legitimate. The money they stole bought a lot of respect and they spent freely on image and luxury in proving Enron was for real…
On March 5th, 2001, Fortune magazine released an article by Bethany McLean. The theme of this article was that Enron’s stocks were overpriced. She stated that Enron’s stocks were really popular and that its numbers were really impressive. Its revenues had doubled to over $100 billion, earnings were increasing by 25% and stocks were returning over 89%. All this seemed a little too much like a fairy tale. She raised questions like ‘Where does Enron get its revenues from?’, ‘Why it was so complicated to get information from Enron?’ and so on. When asked these questions, various Enron…
Enron was the country’s largest trader and marketer for electric and natural gas energy. Its core business was buying energy at a negotiated price and later, selling the energy when prices increased. As an energy broker, Enron provided a service by allowing producers to negotiate a certain price while Enron took the risk that prices would fall below what it bought energy. Buyers of energy also benefited because Enron could ensure the supply of energy. In 2000 Enron was listed number five on the Fortune 500. What happened to the company which was among the most admired for vision and quality thinking? Enron was the company that held virtual assets and not the real assets, such as power stations, which were capital incentive with low returns and ongoing debt.…
Some argue Enron’s record-breaking bankruptcy and eventual demise was the result of a lack of ethical corporate behavior attributed, more generally, to capitalism’s inability to check the unmitigated growth of corporate greed. Others believe Enron’s collapse can be traced back to questionable accounting practices such as mark-to-market accounting and the utilization of Special Purpose Entities (SPE’s) to hide financial debt. In other instances, people point toward Enron’s mismanagement of risk and overextension of capital resources, coupled with the stark philosophical differences in management that existed between company leaders, as the primary reasons why the company went bankrupt. Yet, despite these various analyses of why things went wrong, the story of Enron’s rise and fall continues to mystify the general public as well as generate continued interest in what actually happened.…
During the 90 's Enron was considered as an innovative company within the global business market. Enron was known for its unique innovative technologies and distinctive approach to trading in the world of e-commerce. On December 2, 2001, Enron announced the biggest bankruptcy in history and when many people hear the word, Enron they associate it with the one of the most important accounting scandals in our lifetimes rarely is it associated with a breakdown in communication. Matthew Seeger and Robert Ulmer (2003, p. 59) assert that responsible leadership is built upon three communication-based leader responsibilities. Those factors being, (1) communicating appropriate values to create a moral climate, (2) maintaining adequate communication to be informed of organisational operations, (3) maintaining openness to signs of problems. A breakdown in any of these aspects can cause varying degrees of turmoil for an organisation; Seeger and Ulmer articulate that the problems experienced by Enron were the result of a direct failure to carry out communication-based responsibilities. This paper has a specific focus on determining how the communication of Enron’s leaders contributed to its failure. Although the specific financial shortcomings are not fully addressed in this paper, the corporate communication and culture dictated the intentions of these shortcomings and therefore can be held responsible. Before attempting to analyse the concepts of Seeger and Ulmer some background information about Enron and ethics will be explored.…
The purpose of this paper is consider three possible rationales for why Enron collapsed—that key individuals were flawed, that the organization was flawed, and that some factors larger than the organization (e.g., a trend toward deregulation) led to Enron’s collapse. In viewing “Enron: The Smartest Guys in the Room” it was clear that all three of these flaws contributed to the demise of Enron, but it was the synergy of their combination that truly let Enron to its ultimate path of destruction.…
In 2001, the world was shocked by the demise of Enron, a multibillion dollar corporation that had thousands of employees and people that had affiliations with the company including The White House itself. Because of the financial chaos and destroyed lives and reputations this catastrophe left in its path, questions arose concerning how exactly it happened, why it occurred, and who was behind it. It is essential to understand how this multibillion dollar corporation rose to power and later imploded. Enron itself was born as the result of Houston’s Natural Gas and InterNorth, a gas based pipeline company from Nebraska in 1985. In the final analysis, the conspiracy of Kenneth Lay, Jeffery Skilling, and others, including the accounting firm of Authur Anderson, led to the collapse of Enron due to fraud, shady accounting practices, false reporting revenue, and general disregard of virtually every principle of business ethics.…
The collapse of Enron is known as one of the biggest corporate scandals in the twentieth century lead by greed, lack of leadership and bad investment. Employees of Enron loss their retirement saving, jobs and some even committed suicide as a result to the down fall of Enron. Enron known as the world’s largest energy companies in the United State failed due to unethical accounting techniques and poor leadership. One may wonder how this is possible with the cleaver work of chief executive officer of Enron this transformation of making Enron a financial trade company done by hidden huge amount debt and inflating earning. Companies put lots of trust in their key employees many time no question ask in their decisions. In Enron this form of one man show leadership contribute to its demise. In a well structure business everyone is consider a key employee and decisions are made to benefit every employee. In the case of Enron failed to intervene in the wrong doing of the management staffs because sales were increasing which is…
The central text for this project is the film Enron: The Smartest Guys in the Room by filmmaker Alex Gibney. This film investigates, documents and then exposes the many moves that led to the collapse of Enron. The director focuses on the chief leaders of the corporation as his principal characters in order to develop the story as a human tragedy. Throughout the course of the film, each leading character is revealed. All players were found to be distinct in their strategies and methods. However, all were alike in their attitude and way of thinking. Each one was goal-driven and each found a way, by whatever means possible, to achieve their desired end: making money. Gibney incorporates many strategic moves into this film that contribute…
“Enron: The Smartest Guys in the Room” shows us how basic human nature does not change, whether it is firing as a means to resolve disputes, or in the ceaseless obsession to gain for profitability sake. This all makes for terrible human actions. According to Bethany McLean, the collapse of Enron is a story of “human failure” that created a culture where profitability is the priority.…
The film Enron: The Smartest Guys in the Room (2005) demonstrates that Enron, as a company, was managed through patriarchal and authoritarian principles that facilitated, and even encouraged, illegal activity. Enron was a well-respected company that received accolades in the press and was named Fortune Magazine’s most admired company for several years; this created an atmosphere of supremacy and superiority within the business and the top company leaders (Gibney, 2005). Company leaders like Jeffrey Skilling, Lou Pai, and Kenneth Lay fostered an authoritarian environment within the company where whistleblowers or other doubters were humiliated and devalued; at the same time, the company was engaged in illegal and unethical business practices perpetrated against the public (Schwartz, 2002). The authoritarianism within Enron only grew as the company’s financial footing became less secure (Schwartz,…
Between the years of 1979 and 2001, Enron was known for the largest market of electricity and gas. The question that still subsides is how they managed to go bankrupt with no recollection of a downfall? Who’s to blame for the end of Enron? Was it the traders or the executive leaders? Could it be both? Analyzing the executive social styles, motivation methods, and leadership; there could be a solution to the plummet of one of the largest companies in the U.S.…
To quote Edmund Burke “Those who don’t know history, are doomed to repeat it”. Here we are, thirteen years removed from the Enron scandal. The aftermath led to the Sarbanes-Oxley Act of 2002 and stricter regulations on companies going public. People have a tendency to believe that things like this can only happen to massive companies, but we must remember that Enron once started off as a small company, a company like LJB. In 1985, they were just a pipe line company, and by 1999 they were the biggest online trading company in the world.…