What I Learned from Studying the Rise and Fall of Enron

Greg Whalley, (former Enron President and Chief Operation Officer) had six to eight conversations last fall with the Treasury’s Department Peter Fisher, including one in which he asked Fisher to call Enron’s lenders as they decided whether to extend credit to the company.

Over the last decade, headlines have told stories of unethical behavior from corporations such as Enron, Worldcom, Boeing, Xerox, and Rite Aid. As business continued to grow, so has the laws and regulations that govern corporations to make sure they continue to practices their business legally and ethically. Rules and regulations are made because of the unethical practices that corporations have made due to greed and power.

Are businesses in corporate America making it harder for the American public to trust them with all the recent scandals going on? Corruptions are everywhere and especially in businesses, but are these legal or are they ethical problems corporate America has? Bruce Frohnen, Leo Clarke, and Jeffrey L. Seglin believe it may just be a little bit of both. Frohnen and Clarke represent their belief that the scandals in corporate America are ethical problems. On the other hand, Jeffrey L. Seglin argues that the problems in American businesses are a combination of ethical and legal problems. The ideas of ethical problems in corporate America are illustrated differently in both Frohnen and Clarke’s essay and Seglin’s essay.

Enron’s ride is quite a phenomenon: from a regional gas pipeline trader to the largest energy trader in the world, and then back down the hill into bankruptcy and disgrace. As a matter of fact, it took Enron 16 years to go from about $10 billion of assets to $65 billion of assets, and 24 days to go bankruptcy. Enron is also one of the most celebrated business ethics cases in the century. There are so many things that went wrong within the organization, from all personal (prescriptive and psychological approaches), managerial (group norms, reward system, etc.), and organizational (world-class culture) perspectives. This paper will focus on the business ethics issues at Enron that were raised from the documentation Enron: The Smartest Guys

Analysis of Enron: the Smartest Guys in the Room One of the greatest achievements of Enron: the Smartest Guys in the Room, is the documentary’s ability to so meticulously and cohesively deconstruct the corporation’s practices, from top to bottom, to illustrate even for the layman just how fundamentally illegal and reckless its leadership was. One of the reasons that the film’s title (which is based on and taken from the book of a very similar name) is so fitting, is that the sorts of business ventures that Enron pursued—be it their Blockbuster bandwidth scheme, their Dabhol power plant project, or their California energy price-gouging—required such immensely-detailed, calculated planning and maneuvering, that the notion that those at the top didn’t know

Enron was one of the largest energy, commodities, and services company in the world. It was founded in 1985 and based in Huston, Texas. Before its bankruptcy on December 2, 2001, there are more than 20,000 staff and with claimed revenues nearly $101 billion during 2000. Enron was the rank 16 of Fortune 500 in 2000. In 2001 it revealed that Enron’s financial report was planned accounting fraud, known since as the Enron scandal. In the Enron scandal, Enron used fraudulent accounting practices to cover its fraud in reporting Enron’s financial information. Its purpose is to hide the significant liabilities from its financial statement. Enron tried to make its financial report with great revenue to attract more people to invest it. It continued to spread the information that advance its stock price continued to rise. In fact, Enron was with a large amount of liabilities and loss. The key executives of Enron continually spread the fake information of Enron’s financial report and kept encourage the people to buy its stock. They knew the real financial condition of Enron. They knew the outlook of Enron is not good, so they sold their stocks secretly to generate profit before the company bankruptcy. After the people knew that Enron had a large amount of loss, the stock price was drop from 90 dollars per share to just pennies. In addition, the bankrupt of Enron had a great effect in the California energy market. The bankrupt of Enron made California had a shortage of electricity

Ethical issues are a significant area for companies doing business deals on a daily basis. In today’s high tech and the ultra-competitive business world, unfortunately, ethical conduct is often ignored. Many huge companies like Enron, Arthur Anderson, AIG, Fannie Mae and Freddie Mac, as well as Bank of America, are crushed, or seriously damaged with the lack of ethics compass in place. Organization ethics is the guidelines and principles by which businesses operate; “the principles and values of each person in a business” will have “a direct influence on the company’s success” (Renshaw, Kubat & Angellotto, 2013, p. 11).

Enron’s code of ethics was supposed to be based on respect, integrity, communication and excellence…most of the upper management failed on one or all of the codes. Lay and Skilling had little or no integrity based on their approval of the shoddy accounting practices. They had their own corporate culture driven by greed and intimidation. The top management was continuously aggressive in getting its employees to meet the sales objectives irrespective of ethical behavior. This aggressive earnings management style forces employee to try to accomplish goals regardless of the moral and ethical cost.

Enron was a business conglomerate during the 1990s, formed by the merger of smaller oil and energy companies. Houston executives Kenneth Lay (Chairman), Jeffrey Skilling (chief executive officer (CEO) and Andrew Fastow (chief financial officer (CFO) parlayed their new mega-company into a favorite Wall Street company, bragging of record profits with negligible losses. During the 1990s, the three senior executives changed Enron from a traditional gas and electricity company into a $150 billion energy corporation. For instance, from 1998 to 2000 only, Enron’s returns rose from approximately $31 billion to over $100 billion, making the company to be the seventh biggest conglomerate of the Fortune 500. Unidentified to nearly everybody, this picture was the result of one of the largest swindles in financial history (Ferrell, Fraedrich & Ferrell, 2013).

Beyond the dollars and cents, the Enron catastrophe offers a new textbook example of failed ethics in business. Individuals are responsible for their actions; unethical or illegal individual actions are systems of systemic problems, and Enron’s system of accountability, oversight, ethical disclosure and corporate concerns were flawed. The corporate culture at Enron exemplified values of risk taking, aggressive growth, and entrepreneurial creativity. Although these can be positive values, they were not balanced by genuine attention to corporate integrity and value. Since the culture at Enron was not well

December 31, 2001 will forever be etched in history as the day that one of the biggest white collar scandals came to an end. Electric and natural gas giant Enron was found to have been defrauding its investors out of billions of dollars in order to increase its stock prices, and fatten the pockets of high executives particularly Chairman and CEO Kenneth Lay, President and COO Jeffrey Skilling, and CFO Andrew Fastow. Thousands of employees were laid-off and lost their 401(k); those already retired lost funding from their pension.1 In this paper I will demonstrate that the Enron corporation was operating on a foundation of fraud, corruption, greed, and immorality; I will also reflect on the legal and financial consequences surrounding the scandal.

The purpose of this article is analyze the downfall of the Enron Corporation and how the collapse of Enron Corporation consequence affected the United states financial market. Enron Corporation was the seventh largest company in the United States, and had the biggest audit failure. In this Research paper, it describes the reason of Enron Corporation collapse, including details of the internal/ external management, accounting fraud, and conflict of interest. Enron is the largest bankruptcy in America history!

In light of the recent scandals that rose around big multinationals such as Enron and WorldCom, it has become evident that reform in the traditional corporate operations and objectives was to be encompassed in the organisations corporate strategies. Indeed throughout the years, companies main objectives were defined primarily as being economic objectives, Multinationals developed with sight of profit maximisations regardless to the other incentives, Friedman considered that to be the foundation for a well-managed company, it was further considered that the financing of any other sort of social corporate activities rather unnecessary. The expenses were regarded as expenditures for the owners and investors; this was a time where shareholders rights were regarded as conflicting with other constituents namely the employees, creditors, customers or the community in general. However this interpretation is seen as rather inadequate due to the nature of the amalgamated relation between both constituents. Stakeholders in modern corporate doctrine are considered as a core apparatus for the well functioning of a business. It is however often argued that the only way for a corporation to achieve better results and maximise its profits is to include other people in the process, individuals or organisations with direct or indirect interest in the well performance of the company, that is the reason why modern regulations and codes include a number of stakeholders other than the

Ethics in the business world can often times become a second priority behind the gaining of profits and success as a company. This is the controversial issue that led to the Enron scandal and ultimately the fall of this company. Enron Corporation was an energy company, and in the peaks of their success, they were the top supplier of natural gas and electricity throughout America. Enron Corporation came about from a merger between Houston Natural Gas and InterNorth. Houston Natural Gas was a gas providing company formed in Houston during the 1920’s. InterNorth was a company formed in Nebraska during the 1930’s and owned one of America’s largest pipeline networks. In 1985, Sam Segnar, the CEO of InterNorth bought out Houston Natural Gas for $2.4 billion. A year later in 1986, Segnar retired and was replaced by Kenneth Lay, who renamed the company and created Enron. Enron was the owner of the second largest pipeline in America that measured over 36,000 miles. The company was also the creator of the “Gas Bank”, which was a new way to trade and market natural gas and served as an intermediary between buyers and sellers. As the company continued to develop, it became more of a trader rather than a producer of gas. This trading extended into coal, steel, water and many other areas. One of Enron’s largest successes was their creation of a website called, “Enron Online” in 1999, which quickly became one of the top trading cites in the world. By the year 2000 Enron as a company was

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?