Essay about The Downfall of Enron

Kenneth Lay, former Chairman and CEO, and Jeff Skilling who was also a CEO and COO of Enron, had the major part in Enron when it collapsed and went bankrupt. Because of deregulations Ken Lay enter Enron in 1985 through a merger a vast network of natural gas and pipeline. Later, Enron grew into an energy trading company which was worth $68 billion in 2000. Lays family was poor, which made him ambitious to earn wealth regardless of the path he takes, hence, unethical professionalism at Enron. Enron took advantage of his decision to let gas prices float on the market. Rich Kinde found out about Enron’s oil scandal in 1987 by the misappropriation of

Greg Whalley, (former Enron President and Chief Operation Officer) had six to eight conversations last fall with the Treasury’s Department Peter Fisher, including one in which he asked Fisher to call Enron’s lenders as they decided whether to extend credit to the company.

Finance and accounting remain the core of the Enron story, but the company's cowboy culture -- and the way top bosses such as Mr. Fastow and former Chief Executive Jeffrey Skilling inspired it -- are also key to understanding what happened in this historic business debacle. Only now is the full scope becoming apparent, amid government probes and a growing willingness by some former and current employees to speak about it.

The word “fraud” was magnified in the business world around the end of 2001 and the beginning of 2002. No one had seen anything like it. Enron, one of the country’s largest energy companies, went bankrupt and took down with it Arthur Andersen, one of the five largest audit and accounting firms in the world. Enron was followed by other accounting scandals such as WorldCom, Tyco, Freddie Mac, and HealthSouth, yet Enron will always be remembered as one of the worst corporate accounting scandals of all time. Enron’s collapse was brought upon by the greed of its corporate hierarchy and how it preyed upon its faithful stockholders and employees who invested so much of their time and money into the company. Enron seemed to portray that the goal of corporate America was to drive up stock prices and get to the peak of the financial mountain by any means necessary. The “Conspiracy of Fools” is a tale of power, crony capitalism, and company greed that lead Enron down the dark road of corporate America.

Enron made greater use of social control as a means of guiding employee action, however, the company did have limited methods of formal control in place. By using social influence tactics, limiting dissenting opinion, and inflicting a sense of high cohesion among employees, Enron deceived millions into believing the company was more profitable than it actually was. Because Enron’s values and norms were not conducive to a successful, ethical company, the employee’s targets, attitudes, and behaviors led to Enron’s undesirable outcomes. (O’Reilly and Chatman 165) Enron’s downfall can be largely contributed to its norms and values, of which were not strategically appropriate. Enron valued money above all else, which was

As Bethany McLean and Peter Elkind portray in The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron, there was a chain-reaction of events and a hole that dug deeper with time in the life-span of, at one time the world's 7th largest corporation, Enron. The events were formulated by an equation with many factors: arbitrary accounting practices, Wall Street's evolving nature and Enron's lack of successful business plans combined with, what Jeff Skilling, CEO of Enron, believed was the most natural of human characteristics, greed. This formula resulted in fraud, deceit, and ultimately the rise and fall of Enron.

1. The Enron debacle created what one public official reported was a “crisis of confidence” on the part of the public in the accounting profession. List the parties who you believe are most responsible for that crisis. Briefly justify each of your choices.

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?

In 1985, two companies, Houston Natural Gas, and InterNorth merged to form Enron. Kenneth Lay wanted to create a company that can supply electricity and natural gas at a much lower price. As time went on, Enron ranked as the nation’s sixth largest energy company with global internet trading commodities in plastics, steel, petrochemicals and waste water to name a few (Fusaro, 2000, p. 157). From the time they merged to form Enron up to the point of their collapse, Enron’s executive committee had squandered many of the company’s assets through bad strategies, hiding money, and creating an illusion of a stable financial company.

The leading factor that had Enron into its demise revolves around the notion that, “companies are often so concerned with appearance and damage control that they are unwilling to engage in the degree of examination required to root out the entrenched causes of trust violations” (Hurley, Gillespie, Ferrin & Dietz, 2013). The historical performance of Enron’s rising share prices, coupled to the constant positive media attentions, only added fuel to the fire in terms of Enron’s competitive culture. As a consequence of these external factors, Enron’s top management felt the need to be able to sustain their image of rapid growth, since negative balances on their financial reports would have been an indication to investors that Enron may not be as successful as it appeared after all, leading to possible negative repercussions towards their overall performance, and potentially inevitably lead to its ill-fated downfall. Therefore to prolong their fate, Enron employed the use of highly questionable accounting methods and the use of deceiving partnerships, such as SPE’s (Special Purpose Entities), with the aim to create a façade that they’re highly successful by shrouding losses, falsifying profits and to conceal debt amounts.

Enron was once one of the world 's leading energy companies by reshaping the way natural gas and electricity were bought and sold. They filed the largest corporate bankruptcy in American history in 2001. Enron Corporation was an energy company running out of Texas that was started when two companies, Houston Natural Gas and InterNorth, merged together in 1985. By 1992, Enron became the largest seller of natural gas in North America and began to offer other services like wholesaler trading and risk management. The company’s popularity and profitability continued to increase throughout the 90s and in 2000 was named number 7 on the fortune 500 list bringing in over 100 billion dollars of revenue. Enron shares were worth $90.75 at their peak in August 2000 and dropped to $0.67 in January 2002. Enron announced a third quarter loss of $618 million on October 16, 2001. A couple days later, the SEC opened a formal investigation into Enron’s transactions (Link 2). What caused this shocking fall of Enron? The fall of Enron was caused primarily by the following three factors; the systemic failure by the Securities and Exchange Commission, hiring auditors who were already affiliated with the company, and violating a code of ethics.

It seems like business morals and ethics are being whisked to the side in lieu of the ever growing demand of higher stock prices, rising budget goals and investor profits. Despite the increased regulation of corporations through legislation, such as, Sarbanes-Oxley, some corporations still find themselves struggling to maintain ethics and codes of conduct within the workplace. In reviewing the failings of the Enron Scandal, one can heed the mistakes that both individual and organization malaise, such as, conflicts of interest, lack of true transparency and the sever lack of moral courage from the government, executive board, senior management and others, contributed to the energy giant’s downfall.

Enron company was the largest corporation in the world for the period of 1985-2001, which mainly concentrated its business on supplying natural gas and electricity throughout the world. Company faced tremendous success that brought billions of dollars to its owners as well as shareholders. However it was not long lasting and by the period of time, in 2001, Enron organization had gone bankrupt. There are various reasons of such fatal completion of Enron, but were there any ways that could prevent its bankruptcy? So here, we are going to look into several strategies which might resolve internal and external problems arisen in Enron company.

Ethics in the business world can often times become a second priority behind the gaining of profits and success as a company. This is the controversial issue that led to the Enron scandal and ultimately the fall of this company. Enron Corporation was an energy company, and in the peaks of their success, they were the top supplier of natural gas and electricity throughout America. Enron Corporation came about from a merger between Houston Natural Gas and InterNorth. Houston Natural Gas was a gas providing company formed in Houston during the 1920’s. InterNorth was a company formed in Nebraska during the 1930’s and owned one of America’s largest pipeline networks. In 1985, Sam Segnar, the CEO of InterNorth bought out Houston Natural Gas for $2.4 billion. A year later in 1986, Segnar retired and was replaced by Kenneth Lay, who renamed the company and created Enron. Enron was the owner of the second largest pipeline in America that measured over 36,000 miles. The company was also the creator of the “Gas Bank”, which was a new way to trade and market natural gas and served as an intermediary between buyers and sellers. As the company continued to develop, it became more of a trader rather than a producer of gas. This trading extended into coal, steel, water and many other areas. One of Enron’s largest successes was their creation of a website called, “Enron Online” in 1999, which quickly became one of the top trading cites in the world. By the year 2000 Enron as a company was

The Enron Scandal was an enormous controversy in 2001. This scandal went on for years until finally the government caught up with what was going on. In the Enron case, the company was stating that they were making profits from assets even though they were not making any money from it. They would also transfer any information to an off-the-books corporation if they were not making as much as they thought that they should be making. All this information would be unreported so that nobody would know that the company was losing money.