A Film Review of 'Enron: The Smartest Guys in the Room'

Before going into an analysis on the organizational culture at Enron, I will first elaborate on the severity of the unethical behavior that existed at Enron. The problem can best be shown in the words of an Enron employee who said “If I’m going to my boss’s office to talk about compensation, and if I step on some guy’s throat and that doubles it, then I’ll stomp on that guy’s throat”(Enron: The Smartest Guys in the Room). This culture of greed and corruption can also be seen through Enron’s mark to market accounting system, in which Enron cashed in on ideas and “future profits” without actually making anything. Furthermore,

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

Enron Corporation’s failure in the year of 2001 has become a depiction of unethical corporate behavior for years to come. After having watched Enron: The Smartest Guys in the Room; I found many organizational communications course concepts could be brought to our attention within the documentary. To further our understanding, I will offer my insight as to how class-related concepts connect with the documentary by discussing how Enron developed strong organizational values by identifying certain heroes and their stories that developed their sense of strong risk taking as well as discussing Enron’s “rank and yank” system that can be asserted with F.W. Taylor’s work within

Even though Skilling was committing crimes, such as fraud, he was being recognized for his accomplishments. Mr. Skilling was training Andy Fastow to become an accomplished individual not only criminally, but financially as well. Through all that Andy Fastow absorbed from Skilling, he started his criminal behavior. Andy Fastow created bogus companies to keep the companies debt a secret from others. With this entire event going on Fastow took money and implemented it into his personal accounts. When criminals steal money they tend to do it in small amounts, so others do not discover it, but eventually it gets to a point that it gets so out of control that the person committing the crime cannot stop because the rush is high. He felt as if what he was doing was perfectly acceptable because it should have been part of his daily routines. Since criminality is beyond social control, he had no issues committing them. He continued his behavior and Mr. Fastow only developed his ideas for the better. All of the top executives created an environment of intimate business interactions. They believed that deception was justified and “fraud is the reality” (Magnolia Home Entertainment).

The story of Enron is truly remarkable. As a company it merely controlled the electricity, natural gas and communications sectors of the world. It reported (key word, reported) revenues over one hundred billion US dollars and was presented America’s Most Innovative Company by Fortune magazine for six sequential years. But, with power comes greed and Enron from its inception employed people who set their eyes upon money, prestige, power or a combination of the three. The gluttony took over sectors which the company could not operate proficiently nor successfully.

As with much of Enron, their outward appearance did not match what was really going on inside the company. Enron ended up cultivating their own demise for bankruptcy by how they ran their company. This corrupt corporate culture was a place whose employees threw ethical responsibility to the wind if it meant financial gain. At Enron, the employees were motivated by a very “cut-throat” culture. If an employee didn’t perform well enough, they would simply be replaced by someone who could. “The company’s culture had profound effects on the ethics of its employees” (Sims, pg.243). Like a parent to their children, when the executives of a company pursue unethical financial means, it sets a certain tone for their employees and even the market of the company. As mentioned before, Enron had a very “cut-throat” attitude in regards to their employees. This also became one Enron’s main ethical falling points. According to the class text, “employees were rated every six months, with those ranked in the bottom 20 percent forced to leave” (Ferrell, 2017, pg. 287). This system which pits employees against each other rather than having them work together will create a workplace of dishonesty and a recipe of disaster for the company. This coupled with the objective of financial growth, creates a very dim opportunity for any ethical culture. “The entire cultural framework of Enron not only allowed unethical behavior to flourish,

Enron: The Smartest Guys in the Room shows us how basic human nature does not change, whether it's in the easy fall into killing as a means to resolve disputes, or in the incessant human obsession to acquire for acquisition's sake. This all makes for terrible human actions.

“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

WorldCom, for example, was facing a downward trend in their industry. The telecommunications company was going south, especially thanks to text messaging and the internet. In addition, the government denied them the ability to merge with Sprint (a $129 billion dollar merger), which quickly halted their growth. WorldCom had built a growth strategy built upon mergers and acquisitions, instead of growing product lines and larger marketing campaigns. So when the federal government denied their ability to grow large enough to discourage competition, they had to look elsewhere to increase shareholder profitability. Another venue of motivation was of course based upon the Fraud Triangle. This diagram or model consists of three things for one to commit fraud: pressure, opportunity, and rationalization. WorldCom had all three things – leading them straight towards disaster. The CFO was facing immense pressure from stakeholders and the executive board to increase profits (and growth), he had the opportunity as he controlled the books, and he either had justification or, more probably, a lack of ethics. Applying this triangle to Enron, all three factors were present. Enron was facing immense pressure to continue their standing as one of the top 10 fortune 500 companies, as well as continuing to be named one of the world’s most

Enron’s ride is quite a phenomenon: from a regional gas pipeline trader to the largest energy trader in the world, and then back down the hill into bankruptcy and disgrace. As a matter of fact, it took Enron 16 years to go from about $10 billion of assets to $65 billion of assets, and 24 days to go bankruptcy. Enron is also one of the most celebrated business ethics cases in the century. There are so many things that went wrong within the organization, from all personal (prescriptive and psychological approaches), managerial (group norms, reward system, etc.), and organizational (world-class culture) perspectives. This paper will focus on the business ethics issues at Enron that were raised from the documentation Enron: The Smartest Guys

In this case of Enron the corporate culture played a vital role of its collapse. It was culture of full of moneymaking strategies and greed, in the firm Greed was good and money was God. There was no or very little regards for ethics or the law, they operated as there was no law and ethics in the world (Enron Ethics, 2010). Such culture affected all the employees of the firm from top to down. Organizational culture supported unethical behaviour and practises, corruption, cheating and those were all widespread. Many executives and managers knew that the firm is following illegal and unethical practises, but the executives and the board of directors did not knew how to change this unethical culture, the firm used creative accounting and were making showing misleading profits every day. Reputation management enabled them carry on their illegal and unethical operations. Moreover if the company made huge Revenue in the unethical way then the new individual who joined the firm would also have to practise all those unethical practises to survive in the company. All of the management was filled by greed and ambition, their decisions became seriously imperfect, thus the firm fell back and managers had to pay in the price in the form imprisonment and fines. Greed is the main key factors that brought the Enron “the most innovative company” to downfall. Enron was looking into the ways of

Enron executives and accountants cooked the books and lied about the financial state of the company. They manipulated the earnings and booked revenue that never came in. This was encouraged by Ken Lay as long as the company was making money. Once word got out that they were disclosing this information, their stock plummeted from $90 to $0.26 causing the corporation to file for bankruptcy.

All of the prior represents the business side of the downfall of Enron. That being said, businesses fail all of the time. The reason why Enron Corporation and its executives will always live in infamy is not because the company failed, but how and why the company failed. How, exactly, does a company worth about $70 million collapse in less than a month? It became clear that the company not only had financial problems, but ethical problems that started from the top of the company and trickled down. A key player in these problems was Jeffrey Skilling. He was a man brought to the company by Ken Lay himself. Skilling brought his own accounting concept to the company. It was called mark-to-market accounting. This concept allowed Enron to record potential profits the day a deal was signed. This meant that the company could report whatever they “thought” profits from the deal were going to be and count the number towards actual profits, even if no money actually came in. Mark-to-market accounting granted Enron the power to report major profits to the public, even if they were little or even negative. It became a major way

Though the numbers looked good, the process behind them was questionable. Unbeknownst to many, Jeff Skilling, a top Enron executive, was able to persuade the SEC and their accounting firm, Arthur Anderson & Company, to approve the use of mark-to-market

Enron's entire scandal was based on a foundation of lies characterized by the most brazen and most unethical accounting and business practices that will forever have a place in the hall of scandals that have shamed American history. To the outside, Enron looked like a well run, innovative company. This was largely a result of self-created businesses or ventures that were made "off the balance sheet." These side businesses would sell stock, reporting profits, but not reporting losses. "Treating these businesses "off the balance sheet" meant that Enron pretended that these businesses were autonomous, separate firms. But, if the new business made money, Enron would report it as income. If the new business lost money or borrowed money, the losses and debt were not reported by Enron" (mgmtguru.com). As the Management Guru website explains, these tactics were alls designed to make Enron look like a more profitable company and to give it a higher stock price.