The Rise And Fall Of Enron

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

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

According to Johnson (2012) leaders are powerful role models, and policies will have a little effect if leaders do not follow the rules they set. In Enron case, corruption and ethical misconduct were deeply embedded in their business culture where profitability was more important than ethics. In this paper, I will address the factors that had led to the development of the culture of profit before principle at Enron. Also, I will create my personal code of ethics that will guide me in my professional and personal decision making and doing the right thing when faced with ethical challenges.

Leadership of the Enron corporation was a group of high payed executives. Their mission statement claimed they “treat others as we would like to be treated ourselves....We do not tolerate abusive or disrespectful treatment. Ruthlessness, callousness and arrogance don 't belong here." (Revolutionary Worker 2002) However, “as in other aspects of Enron’s culture, the appearance did not match reality.” (Stephens and Behr 2002)

The entire downfall of the giant Enron was brought about due to various ethical lapses that, in the end, would muddy the reputation of anyone who had a connection with the company. Even according to Gibney (2005), it was widely known that Enron’s CFO Andy Fastow would tend to implement and use less than ethical financial practices. The unethical behavior, though, does not usually just occur with one person or one position. Gibney (2005), throughout the entire documentary, hints at the idea that all Enron management/leadership knew of and were complicit in the unethical practices. In the end, Enron had betrayed the trust of thousands of employees and investors. Both of these betrayed parties would try to seek some level of justice in what had become one of America’s worst economic blunders (Gibney, 2005).

When Skilling was hired, the staff that he motivated as being innovative and independent, used accounting loopholes and poor financial reportings to hide billions of dollars in debt from failed deals and projects. Enron looks like the perfect illustration of the bad barrel bad apple disease. Enron’s CEO Jeff Skilling, pursued a culture that would push through the limits, “Do it right, do it now and do it better.” he used to say. Skilling encouraged employers to be independent and innovative. This gave rise to the pursuit of excellence, as executives worked to develop ways of preserving Enron’s success, when they unaware they were developing its downfall.

Enron was a Houston based energy, commodities and services company. When people hear the name Enron they automatically associate their name with one of the biggest accounting and ethical scandals known to date. The documentary, “Enron: The Smartest Guys in the Room,” provides an in depth examination of Enron and the Enron scandal. The film does a wonderful job of depicting the downfall of Enron and how the corporate culture and ethics were key to Enron’s fall. As the movie suggests, Enron is “not a story about numbers, it is a story about people.”

The story of Enron is one of a perfect storm--the right people in the right places with the right ideas, but the exact opposite. Moreover, it is a story about accounting fraud, deception, the ugly side of corporate culture and, most of all, greed. In entry level accounting classes, it is taught that publishing accurate financial statements and being honest in accounting practices are fundamental to maintaining a healthy business and achieving lasting success. Enron is a shining example of what happens when you choose to violate these principles. In order to fully understand what caused the collapse of the corporate "rock star" that was Enron we will discuss the people involved, the crimes they perpetrated, and the results of said

Enron was a corporation that reached heights unknown, only to watch it fall apart from the inside out based on a foundation of falsehoods and cheating. Enron established a business culture that flourished on competition and was perceived in society as an arrogant corporation, mainly because of its corporate leadership. The fairytale of Enron actually ended as a nightmare with it destroyed by one of America’s largest bankruptcies in history. The demise of Enron impacted the livelihood and futures of numerous employees, their pensions, and in due course impacted Wall Street in a significant way. Even people today are amazed at how such a powerful company met its demise so rapidly. Enron’s end was a product of greed when certain executives of Enron were not eager to accept the failure of their company. The company utilized mark-to-market accounting that detailed the projected impending profits from a long-term deal (Lawry, 2015, p. 28) The results of the deals did not generate revenue as anticipated, but tremendous loss instead. This resulted in Enron accumulating enormous amounts of debt that they attempted to keep classified from the public. Ultimately the truth came to fruition.

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.

Enron was formed in 1985 after the deregulation of natural gas pipelines. it was formed from the merger of Houston natural gas and InterNorth. During the merger, Enron suffered a lot of debt, and due to the deregulation had no longer exclusive rights to its pipe lines. In order to survive, it had to come up with something fast, which was both effective and efficient. Kenneth Lay, the CEO of Enron, hired Jeff Skillings, a young consultant who had a background in banking and asset and liability management and assigned him to develop a strategy in boosting Enron’s business. He came up with a revolutionary idea to boost Enron’s credit, cash and profit woes. Skilling proposed that Enron

The employees tend to view themselves as individuals, focus upon their own needs and without putting extra effort on behalf of the overall company business. The culture was all about how much money could be made for many executive through the stock option incentive program. Finally, the culture makes it hard for creating an ethical environment and fraud is almost inevitable. The reason was Enron’s management has less focus to create a relationship of openness and trust with employees. Staff members who saw wrongdoing were either ignored or silenced. As such, it is an essential component in any business's ultimate success or failure.

Of more than 30,000 employees that were actively employed with Enron only, John Olson, Margaret Ceconi, and Clayton Verdon, chose the right things to do and performed ethically. However, many other employees just kept silent or even did the things which are obviously unethical and even illegal. Having numerous Enron executives charged with criminal acts, including fraud, money laundering, and insider trading, still only amounted in a very small percentage of the guilty parties being brought to justice. Knowing that top management opened up the Pandora’s Box and created the unhealthy business environment, they still didn’t bear much responsibility for the unethical harm they caused to so many.

The organizational structure of Enron was a calculated one with a clique that was thought as being the “smartest” guiding the rest of the workers. It included Kenneth Lay: Chairman, and Chief executive officer, Jeffrey Skilling: President, Chief operating officer, and CEO (February–August 2001), and Andrew Fastow: Chief financial officer. With the leaders known to be wise and smart, the workers and traders believed in them. They did what was asked of them by the employers. The clique ensured money was not an issue for the workers and subsidies were allocated to them at will. This in itself encouraged the workers to be hardworking and yet

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?