The Collapse Of The Corporate Rock Star

Enron was an energy trading and communications company located in Houston, Texas. During 1996-2001 Enron was given the name of America’s Most Innovative Company by Fortune magazine as it was the seventh-largest corporation in the US. The problem that led this company to bankruptcy was due to the fact that fraudulent accounting practices took place allowing Enron to overstate their earnings and tuck away their high debt liabilities in order to have a more appealing balance sheet (Forbes.com, 2002). Enron’s accounting team “cooked” the books to every meaning of the word so that their investors would not see anything wrong with the failing organization. This poorly structured company led people to jail time, unemployment, and caused retirement stocks to be dried up. Enron had a social responsibility to its stockholders and rather than being up front and honest about the failing company they hid every financial flaw in order to keep receiving money from its investors. By Enron not keeping a social

Upon watching the documentary, one could conclude that Enron’s bosses created a culture of pushing limits and taking risks. From the movie, we understand that Jeff Skilling was known to be a nerd as well as others within Enron. It seemed as though Jeff had woken up one day and decided to change himself by wearing contacts instead of glasses, changing is wardrobe, and doing some modeling. As he changed, so did others who worked under him for the fact that they saw Skilling as their hero. With time, it has been noted that Jeff became some sort of tragic figure. He became a man who was radically different than how he portrays himself. It was known that Skilling was a huge risk taker and he often talked about, and then started to manifest in trips that he began to lead with small groups and customers that were often times dangerous. These

This now bankrupt company, misappropriated investments, pension funds, stock options and saving plans after deregulation and little oversight by the federal government. However, with deregulation an increasing competitive culture emerged as the CEO Jeffry Skilling motto to his organization was to “do it right, do it now, and do it better” this was the rally cried that pushed ambitious employees to engage in unethical behavior as Enron use deceptive “accounting methods to maintain its investment grade status” (Sims, & Brinkmann, 2003, pp.244-245). As Enron continued to flourish and received accolades from the business community this recognition drove executives to continue the façade of bending ethical guidelines before their public fall from

Jeffery Skilling, born November 25, 1953 in Pittsburgh, Pennsylvania. Skilling is know for "handy work" working as the CEO of Enron. He was brought on by Kenneth Lay who was the original founder of Enron. Lay appointed Skilling to Chief Executive Officer in 1997. Skilling pushed an aggressive investment strategy which would considerably help Enron, the biggest gas and energy company at the time, with making $27 Billion in a quarter. Enron slowly but surely was building a house of cards. They would record future anticipating profits actually gains in order to inflate the stock price. In August of 2001, California had an energy crisis. Skilling unexpectedly resigned and sold almost $60 million in Enron shares, The company declared bankruptcy in December

The word “fraud” was magnified in the business world around the end of 2001 and the beginning of 2002. No one had seen anything like it. Enron, one of the country’s largest energy companies, went bankrupt and took down with it Arthur Andersen, one of the five largest audit and accounting firms in the world. Enron was followed by other accounting scandals such as WorldCom, Tyco, Freddie Mac, and HealthSouth, yet Enron will always be remembered as one of the worst corporate accounting scandals of all time. Enron’s collapse was brought upon by the greed of its corporate hierarchy and how it preyed upon its faithful stockholders and employees who invested so much of their time and money into the company. Enron seemed to portray that the goal of corporate America was to drive up stock prices and get to the peak of the financial mountain by any means necessary. The “Conspiracy of Fools” is a tale of power, crony capitalism, and company greed that lead Enron down the dark road of corporate America.

The whole book deals with the bankruptcy of Enron and the book clearly blames it on Rice and Skilling. Talking about the corruption of money, a former high-ranking employee stated “... I had to remind myself that I was human.” That employee received limousine rides to and from private corporate Enron jets. The executives even went on these life endangering adventures simply because their lives were slowly losing challenge because of all their wealth. Soon, this affected their actions showing that their minds would change as if their company became one of their dirt road races in the Baja Desert. The employees would describe Skilling’s requests like puzzles where he would want results and not care about how the employees got

Enron’s executives had large expense accounts and were compensated far beyond the competitors within the industry. Kenneth Lay, CEO of Enron, received over $250 million in compensation from the company over his 17 years with the company. Enron’s culture of arrogance resulted in a two year increase in fictitious revenue of nearly $70 billion from 1998 to 2000. Executives’ compensation within Enron’s energy services division was based on a market valuation formula that was influenced by internal estimates which created a pressure to inflate contracts despite having no effect on the generation of cash flow. Skilling introduced a policy in which the employees ranked in the bottom 20% of the company were forced to leave (Mclean, Varchaver, Helyar, Revell, and Sung, 2001). This created a competitive atmosphere internally and, in many cases, caused the workers to ignore potential errors and

On the superficial level, the attitudes and motives behind the events and decisions causing eventual downfall seem simple enough: collective and individual greed created in the atmosphere of corporate arrogance. As Enron's reputation in the global environment grew, the internal culture of the organization began to worsen significantly. Skilling, Enron Chief Executive, founded the Performance Review Committee, PRC, which gained the reputation of the harshest employee-ranking system in the whole country. Theoretically, this review system was based on the values of Enron - respect, integrity, communication and excellence (RICE). But at the end of the

“Enron: The Smartest Guys in the Room” shows us how basic human nature does not change, whether it is firing as a means to resolve disputes, or in the

As Skilling put it, the biggest motivator for humans is money. Enron's executives received large quantities of stock options, motivating them to manipulate earnings which would cause an increase in the stock price. The nature of Enron's executives also played a big role in influencing employees to display similar characteristics of aggression, arrogance, greed and dishonesty. Executives at Enron were known to take extreme dirt-biking trips to places like Mexico, where they could dangerously travel 1200 miles of rugged terrain. Stories of broken bones, stitches and flipping jeeps became legendary at Enron, and fed the macho personality of the employees. Top management gave its managers blank orders, to "just do it" (60). In turn, employees attempted to not only crush outsiders, but eachother. Skilling encouraged this behavior, saying "he wanted them to

Likewise, Skilling believed that money and fear were the only things that motivated people. He initiated the performance review system at Enron, which was designed so that employees would rate each other from one to five, five being the lowest. 15% of employees had to be rated 5 regardless of their performance and were fired from Enron. This scheme was known as the “rank and yank.” He was known as a visionary, an initiator and was always eager to yield success and

Kenneth Lay was the founder of Enron in 1985 and was the chief executive officer for over 15 years. In 1990 Jeffery Skilling joined the company and later on became the chief executive officer in February 2001. However quickly resigned months later for “family reasons.” In despite of Skilling leaving the company, they were both credited in building Enron into a powerhouse in its creative management. In the near future when the company started going down hill both their names were associated with the culture of corporate scandals that followed Enron’s death. In late

The key factors or critical issues presented in the case are the downfalls of Enron, which originated out of Houston Texas by Han, Henry(n.d.). He was one of the highest paid Chief Executive Officers in 1999. This organization was aware of the first gas pipeline company that implied known worldwide. The company covers the world’s leading electricity innovations, personnel management, and risk management processes. Also, further studies the company 's dramatic failed complex issues that the forced company to file bankruptcy. These items consisted of its trading strategies became under attack or questionable by others within the business sector. Their methods of financial reporting problems (showed the company as attaining, loses, however, the owners and other factors of the organization showed an excessive amount of profit and growth), and governance breakdowns inside and outside the organization. The case offers students a prospect to explore the rise and fall of Enron and to understand the systemic issues in management that affected its board of directors, the audit committee, the external auditors, and financial analysts. Therefore, this was the beginning of the end at Enron: Jeff Skilling publicly announced he was quitting as Chief Financial Officer. "For many of those working within the organization, this is when the downfall and it became (Skilling Takes a Hike (2001) evident. The CEO and CFO or Enron 's regarded as the villain my personal perception are that they

Most of the world has heard of Enron, the American, mega-energy company that “cooked their books” ( ) and cost their investors billions of dollars in lost earnings and retirement funds. While much of the controversy surrounding the Enron scandal focused on the losses of investors, unethical practices of executives and questionable accounting tactics, there were many others within close proximity to the turmoil. It begs the question- who was really at fault and what has been done to prevent it from happening again?

Enron's entire scandal was based on a foundation of lies characterized by the most brazen and most unethical accounting and business practices that will forever have a place in the hall of scandals that have shamed American history. To the outside, Enron looked like a well run, innovative company. This was largely a result of self-created businesses or ventures that were made "off the balance sheet." These side businesses would sell stock, reporting profits, but not reporting losses. "Treating these businesses "off the balance sheet" meant that Enron pretended that these businesses were autonomous, separate firms. But, if the new business made money, Enron would report it as income. If the new business lost money or borrowed money, the losses and debt were not reported by Enron" (mgmtguru.com). As the Management Guru website explains, these tactics were alls designed to make Enron look like a more profitable company and to give it a higher stock price.