Business Leadership in Enron

4743 WordsJul 17, 201119 Pages
EXECUTIVE SUMMARY Enron stands out as one of the biggest failures in business history. It’s implosion in 2001 took the world capital markets and shook the investor confidence in accounting and financial reporting. It even caused the world’s renowned international accounting firm Arthur Andersen to collapse. The most important gatekeeper could not predict Enron’s collapse before it occurred. It was then discovered that Enrons’ senior management had employed complex creative accounting techniques to manipulate the company’s financial figures and hence boost up the financial performance. This paper in contrast explores the internal culture and leadership practices of its top management. It includes a particular emphasis on…show more content…
Enron faced financial difficulties during the early years of its establishment (Sims and Brinkmann, 2003) But, nevertheless, they argued that in 1988 “deregulations of the electrical power’ had resulted in a promising strategy in the field of energy resulting in a new era for Enron. The financing process of the power plant projects was not mature during the time of the deregulation occurrence. The banks which were experiences in this kind of financing had already started to develop of which Enron as a major energy firm then built strong and solid relationship with the capital providers, such as Citibank and Barclays (Baker, 2003). In the mid 1990’s, Enron had started making a shift in it corporate strategy. The idea was to move the focus on its fixed assets, as the main stream of revenue, to the intangibles assets. Following the result of the government deregulations and the establishment of “GasBank’ company as an intermediary for the natural gas contracts, which then allowed Enron to be the leader of the natural gas derivatives market (Kastantin, 2005). According to Enron’s annual report (Enron, 1992, p.2): “Physical assets play a strategic, but not central, role in the way we earn money and this reduces emphasis on merely earning a return on physical assets and allows us to divest non-strategic assets and re-deploy capital into higher growth and stronger-return business” The company’s revenue multiplied from 1996 till

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