The High Turnover Rate Of Leadership

1008 Words May 11th, 2016 5 Pages
1.2 market trends
During 1990s, the reason of the high turnover rate of leadership in Enron was the PRC system and the new “arrogant culture”, which pose a threat to conservative cautious. In this case Enron was put in a highly uncertain environment.

In the late 1990 and 2000, Enron’s traders had great passion on prove themselves. The principle of “priority of profit” at any costs led to considerable agency problems for shareholders of Enron. Undoubtedly, company owners desired high return from investment. The “arrogant culture” could meet investors’ need of profit, although the “arrogant culture” achieved short-term profit by sacrificing company’s long-term stability and wellbeing. It exacerbated the agency problems which accumulated by principals neglecting agency monitoring mechanisms.

Enron applied the “market- to-market” accounting principles in middle of 1990s. it was difficult to estimate the accuracy price of derivative due to lots of subjectivity in the prices based on valuation. Enron had different instruments of derivative. The estimating models and assumptions are range from person to person. With the “arrogant culture” in Enron, these subjective estimators always been overstated. Therefore, the problems of principals’ monitoring mechanisms was intensified.

During 1990S, there were numerous new competitors advent into the market. Those new entrants pose a threat to Enron’s profit. Enron in order to maintain their high return and dominance in their field,…
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