Case Study Essay

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Enron Corporation began as a small natural gas distributor and, over the course of 15 years, grew to become the seventh largest company in the United States. Soon after the federal deregulation of natural gas pipelines in 1985, Enron was born by the merging of Houston Natural Gas and InterNorth, a Nebraska pipeline company. Initially, Enron was merely involved in the distribution of gas, but it later became a market maker in facilitating the buying and selling of futures of natural gas, electricity, broadband, and other products. However, Enron’s continuous growth eventually came to an end as a complicated financial statement, fraud, and multiple scandals sent Enron through a downward spiral to bankruptcy.

During the 1980s, several
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Its method of evaluating employee performance was nicknamed "rank and yank" by Enron employees. Every 6 months, employees were ranked on a scale of 1–5. Those ranked in the lowest category (1) were immediately yanked (fired) from their position and replaced by new recruits. Surprisingly, during each employee review, management required that at least 15% of all the employees ranked were given a 1 and therefore yanked from their position and income. The employees ranked with a 2 or 3 were also given notice that they were liable to be released in the near future. These ruthless performance reviews created fierce internal competition between fellow employees who faced a strict ultimatum; perform or be replaced. Furthermore, it created a work environment where employees were unable to express opinions or valid concerns for fear of a low ranking score by their superiors.

With so much pressure to succeed and maintain its position as the global energy market leader, Enron began to jeopardize its integrity by committing fraud. The SPEs, which originally were used for good business purposes, were now used illegally to hide bad investments, poorly performing assets, and debt; to manipulate cash flows; and eventually, to report more than $1 billion of false income. The following are examples of how specific SPEs were used fraudulently.

Chewco: In 1993, Enron and the California Public Employees Retirement System

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