The Demise of Enron university of phoenix
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July 09, 2012

The Demise of Enron

Introduction: When the issues of business practices, regulation, and ethics are raised in the business world, Enron has frequently finds itself as the flagship example of irresponsibility, and intrinsic fraud. In retrospect, it is clear that Enron lacked a moral compass from the top down. In terms of organizational-behavior theories, these traits manifested themselves as a result of their corporate cognation, and organizational culture. Enrons biggest lack of business ethics was in its accounting. The deeply rooted accounting problem exposed by Enron's failure was the weak consolidation rule prescribed for highly leveraged "special purpose entities" (SPEs), or partnerships that were formed to carry out various projects whose assets and liabilities were not shown in Enron's balance sheet. Enron failed in part because of losses arising out of the many SPEs that it had created. Not only was this poor business practice, but Enron executives knowingly compromised the business so that they could maintain the stock price, and none from the accounting department or any other part of the business acted as a whistle blower or so much as questioned the practice of cooking the books. Unfortunately, these practices did not merely affect the perpetrators, is also destroyed the finances of investors, and faultless employees with stock options, as shares fell from a high near $90.00. Thus, the lack of corporate governance, standards and overall moral compass lead wide spread disaster. Many blame the SPEs and derivatives as the primary cause for failure, but ultimately, it was lack of oversight that was the real problem.
Source:Thomas, W. (2002). The Rise and Fall of Enron When a company looks too good to be true, it usually is.. Journal of Accountancy, 1, online.
The Enron