Enron Stakeholders Essay

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Enron Stakeholder Assignment

Enron was a dream come true for a lot of people, but it was also a nightmare waiting to happen for many more. I am going to examine the collapse of Enron from the management perspective. The three examples of Enron behaving badly that I am going to study are the incidents in Valhalla, the electricity trading in California and the conflict of interest between Andy Fastow and his special purpose entities (SPE). These are just a few cases that led to the failure of the "World's Leading Company." In 1985 Houston Natural Gas merged with InterNorth, of Omaha, Neb., to form Enron and Ken Lay was named chief executive officer. The company was basically a producer of natural gas and had control over enormous
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This new information was hard for Ken Lay to swallow for a number of reasons. First of all, the Valhalla trading company was bringing in profits of $30 million a year, which accounted for one-third of Enron's earnings. The trading company was also off-setting the bleak natural gas prices. Finally, Ken Lay, along with COO Rich Kinder and a few internal auditors made a trip to New York to investigate the trading group. Within a short time of investigating, auditors stated that foul play had occurred (1 p31). Mastroeni and Borget explained the transactions with an absurd story to carry their enormous profits from 1986 into 1987 so as to start the year with a positive balance on the company books. Enron had exceeded its budget estimate for 1986, they said, and they created the Apple account to move money to 1987. The traders got caught in cooking the books; they were keeping two sets of accounting books, one was legitimate for Author Anderson and the other recorded the real transactions (1 p31). At this point Ken Lay had the chance to do the right thing and get rid of the greedy, law-breaking traders. Instead he limited the traders' power and called for a reform, which is visible today, did not happen according to plan. The California energy crisis in 2001 left the state in chaos and in the dark. Enron convinced the state to deregulate electricity which would save billions of dollars a year, but would ultimately cost the state far

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