Enron Case Essay Example

there was a problem with Enron finance, their underwriting filings on debt issues sold to the public proved that wwithout its bankers, of course, Enron could never remained its schemes on the investing public. The auditors were also unethical in the failure of Enron. Enron’s auditor, Arthur Andersen was responsible for ensuring the accuracy of Enron’s financial statements and internal bookkeeping. Auditors failed to ask Enron to better explain its complex partnerships before certifying Enron’s financial statement.

It is the major question raised by the startling disclosure that auditors from Arthur Andersen began destroying Enron documents and purging computer files in September and continued doing so while Enron collapsed. Houston's largest law firm, Vinson & Elkins, was also the one who related to the demise by involving in structuring its transactions, disclosing its financials to the public and conducting internal investigations of its alleged wrongdoing. (3) How did the corporate culture of Enron contribute to its bankruptcy? In some ways, the corporate culture of Enron was the primary cause of the collapse.

In many years, Enron had practiced its creative, high-risk but arrogant culture environment.

Corporations are composed of cultures. In Enron’s culture, employees rewarded for succeeding at any cost. By using the organization’s appraisal system, known as ‘rank and yank’, Enron had forces its employees to battle each other in order to survive. Instead of assess value and contribution, this system encourages the increases in employee’s unwillingness to report misconduct, the reduction of team-work or helping peers and generally self-centered and self-serving actions.

As a result, problems were covered up rather than being communicated to management. With the overwhelming aura of pride, the senior

executives believed Enron would always be the best and its people will handle the risk without danger.

There was a banner in Enron’s lobby proclaimed, “the world leading Company. ” This pride let them down. When their business starts performing poorly, they tried to cover up their own failure in order to protect their reputations and their compensation as the most successful executives in the U. S. The culture also encourages inflation.

Senior management cared more about self-enrichment than the needs of employees.

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. Part A It is hard to believe Enron, the seventh largest leading corporation in electricity, natural gas and communications based in United Stated filled for Chapter 11 bankruptcy in December 2001. The company with claimed revenues of $101 Billion in 2000 finally ended up when investigations revealed that it had inflated its earnings by “hiding its debt, committing institutionalized, systematic and well-planned accounting fraud”.

The scandal is the most significant corporate collapse in the United States since the failure of many savings and loan banks during the 1980s. (1)

Enron Corporation was born in 1985, a resulting company of Houston Natural Gas and Omaha-based InterNorth.

Ken Lay, who had been CEO of Houston Natural Gas, becomes chairman and CEO of the following year. Enron won Fortune Magazine's award of "America's Most Innovative Company" for continuous 6 years, from 1996 to 2001. In 2000, the company was in Fortune's list of the "100 Best Companies To Work For In America. On December 2000, Jeffrey Skilling takes over as chief executive officer but soon resigned for undisclosed reasons after just six month and Lay steeped back into CEO Job. At the same time, Enron Stock hits 52-week high of $84.

87. On Oct 16, Enron reports its first quarterly loss in 4 years of a $638 million, showing $1 billion in charges and discloses $1. 2 billion reduction in the value of shareholders' stake in the company. November 2001 was the time the company announced in a Securities and Exchange Commission revising the financial statements for the previous five years to account for $586 million in losses.

The company filed for bankruptcy in October of 2001 when the Wall Street Ratings Firms began questioning about the corruption. They soon lowered Enron's bond rating over a period of several months to “Junk-Bond” status.

Enron is forced to release control of 30 percent of its North American operations. The Board of Directors resigned and Ken Lay, the CEO, was charged with fraud. Enron created holding companies for both international and its remaining North American holdings. These companies were sold off by 2004. Portland General Electric was spun off, with the majority of stock going to creditors.