Enron And The Enron Scandal

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 began as a pipeline company in Houston in 1985. It profited by promising to deliver so many cubic feet to a particular utility or business on a particular day at a market price.

Jumping right into the summary then. Enron was one of the most successful corporations in America during its prime. Marketing electricity and other commodities, as well as, providing financial and risk management services to other companies were the main types of business that Enron conducted. However, Enron’s successful appearance was found out to be a façade, when it came out that the corporation was making a plethora of unethical business moves. Once the corporation’s actions became public, Enron’s fall from grace quickly followed. (Johnson, 2003)

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.

Enron was a publicly traded energy company formed in 1985 by Kenneth Lay when Internorth acquired Houston Natural Gas; the company, based in Houston Texas, Enron (originally entitled “EnterOn”, but was later subjected to abbreviation), worked specifically in power, natural gas, and paper and even ventured into various non-energy-based fields as they expanded, including: Internet bandwidth, risk management, and weather derivatives. Several years after the founding of the company, Enron hired a man by the name of Jeffrey Skilling, a former chemical and energy consultant, who, upon promotion, created a team of high-level administrative employees who, by using special purpose entities, lackluster reporting of finances, and unethical accounting practices, hid billions of dollars of debt from unsuccessful arrangements and ventures from stock holders and the U.S. Securities and Exchange Commission. Enron executives achieved this scheme by using a controversial accounting method entitled “mark-to-market accounting,” which in essence, assigns value to financial commodities based on their projected market values; mark-to-market accounting is the opposite of cost-based accounting which records the price of a commodity at the purchase price. As a result of this new method, Enron’s worth skyrocketed to over $70 billion at one time, only to collapse miserably several years later—ultimately costing thousands upon thousands of people their jobs, pensions, and retirements. Enron’s employees

Whenever someone hears the word "Enron" today, they usually think of the transgressions committed by the top-level executives who successfully managed to destroy the company's reputation and achievements.

According to the documentation, those Enron people who faced ethical issues used different prescriptive reasoning approach to resolve their dilemma. Take Andrew Fastow as an example, he might not start all the fraudulent financial activities in the first place; however, he decided to do so in order to please the boss, when Ken Lay wanted to see neat financial disclosures. It seemed that Fastow

The company Enron was formed in 1985 after two natural gas companies, Houston Natural Gas and InterNorth merged together. Kenneth Lay, former chief executive officer of Houston Natural Gas was named CEO of Enron and a year later, Lay was assigned to the chairman of Enron. A few years later, Enron launched a website to allow customers to buy stock for Enron, making it the largest business site in the world. The growth of Enron was rapid; it was even named seventh largest company on the Fortune 500 list; however things began to fall apart in 2001. (News, 2006). In the third quarter of that same year, Enron posted an enormous loss of over $600 million in four years. This is one of the reasons why one of the top executive resigned even though he had only after six months on the job. Their stock prices fell dramatically. Eventually, Enron filed for bankruptcy protection. This caused many investors to lose money they had invested in the company and employees to lose their jobs and their investments, including their retirement funds. The filing of bankruptcy and the resignation of one of the top executives, also led to an investigation by the U.S. Securities and Exchange Committee, which proved to be one of the biggest scandals in U.S. history. (News, 2006). All former senior executives stood trial for their illegal practices.

Enron is considered America’s largest corporate failure in history and is a story about greed, fraud, and human tragedy. In 1986, Houston National Gas and Internorth, a natural gas pipeline company, merged to create Enron with Ken Lay as the chair and chief executive officer (CEO). Lay transformed the company into a high tech global operation that traded water, energy, broadband, and electricity. In less than a year, problems arose of fraud and an investigation confirmed inaccuracies with the companies accounting records. In 2000, Enron’s gross revenues exceeded $100 billion, yet no one really knew how Enron was making its money (Stein & Pinto, 2011). In September 2001 when bankruptcy was imminent, top executives secretively took their stock options worth millions while encouraging employees to keep theirs in the company. Three months later, more than 20,000 employees lost their jobs, insurance, and pensions when Enron announced bankruptcy. The movie Enron, The Smartest Guys in the Room, is about how management, leadership, and organizational structures failed and caused unnecessary harm to many people (Gibney, 2005). This paper will look at how organizational behaviors including; ethics, culture, and leadership styles of top executive leaders caused the debacle of Enron.

Enron began by merger of two Houston pipeline companies in 1985, although as a new company Enron faced a lot of financial difficulties in the starting years, though the company was able to survive these financial problems (Enron Ethics, 2010). In 1988 the deregulation of the electrical power markets came into action and flipped the company from up to down, after deregulation company business updated from delivering energy to becoming an energy broker and soon after this Enron once a company struggling

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.

In light of the recent scandals that rose around big multinationals such as Enron and WorldCom, it has become evident that reform in the traditional corporate operations and objectives was to be encompassed in the organisations corporate strategies. Indeed throughout the years, companies main objectives were defined primarily as being economic objectives, Multinationals developed with sight of profit maximisations regardless to the other incentives, Friedman considered that to be the foundation for a well-managed company, it was further considered that the financing of any other sort of social corporate activities rather unnecessary. The expenses were regarded as expenditures for the owners and investors; this was a time where shareholders rights were regarded as conflicting with other constituents namely the employees, creditors, customers or the community in general. However this interpretation is seen as rather inadequate due to the nature of the amalgamated relation between both constituents. Stakeholders in modern corporate doctrine are considered as a core apparatus for the well functioning of a business. It is however often argued that the only way for a corporation to achieve better results and maximise its profits is to include other people in the process, individuals or organisations with direct or indirect interest in the well performance of the company, that is the reason why modern regulations and codes include a number of stakeholders other than the

Enron Corporation was an energy company founded in Omaha, Nebraska. The corporation chose Houston, Texas to home its headquarters and staffed about 20,000 people. It was one of the largest natural gas and electricity providers in the United States, and even the world. In the 1990’s, Enron was widely considered a highly innovative, financially booming company, with shares trading at about $90 at their highest points. Little did the public know, the success of the company was a gigantic lie, and possibly the largest example of white-collar crime in the history of business.

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 story of Enron begins in 1985, with the merger of two pipeline companies, orchestrated by a man named Kenneth L. Lay (1). In its 15 years of existence, Enron expanded its operations to provide products and services in the areas of electricity, natural gas as well as communications (9). Through its diversification, Enron would become known as a corporate America darling (9) and Fortune Magazine’s most innovative company for 5 years in a row (10). They reported extraordinary profits in a short amount of time. For example, in 1998 Enron shares were valued at a little over $20, while in mid-2000, those same shares were valued at just over $90 (10), the all-time high during the company’s existence (9).