Enron: the Smartest Guys in the Room Essay

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The purpose of this paper is consider three possible rationales for why Enron collapsed—that key individuals were flawed, that the organization was flawed, and that some factors larger than the organization (e.g., a trend toward deregulation) led to Enron’s collapse. In viewing “Enron: The Smartest Guys in the Room” it was clear that all three of these flaws contributed to the demise of Enron, but it was the synergy of their combination that truly let Enron to its ultimate path of destruction. As in any organization, the executives ultimately drive company policy, practices and accepted behavior. The three key executives that led Enron down its fatal path were, Ken Lay, Jeff Skilling and Andy Fastow. Like most successful leaders they…show more content…
All of these factors contributed to Jeff’s unwillingness to concede his wrongdoing, right through his trial after the collapse of Enron. While Jeff Skillings’ traders were making a killing for Enron, many of their other projects were disasters. The man who allowed Enron to continue operating despite massive losses from their core operating business was Chief Financial Officer, Andy Fastow. To finance Enron’s existing activities, they needed massive amounts of capital. Most notable were the special purpose entities also known as SPE’s that chief financial officer Andy Fastow created for Enron. These off balance sheet subsidiaries were created primarily to obtain additional financing without having to tarnish its balance sheet with additional long term debt. In conjunction with these SPE’s, Andy Fastow created many complex financial structures which allowed Enron to continue its operations without having to account for debt or losses that law abiding corporations would place on their balance sheet or income statement. While complicit in the deception of investors and the general public, Andy Fastow most likely used the idea of diffused responsibility to justify his actions. Before being able to create these special purpose entities, both the board of directors and Enron’s accounting firm Arthur
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