...breakdown in any of these aspects can cause varying degrees of turmoil for an organisation; Seeger and Ulmer articulate that the problems experienced by Enron were the result of a direct failure to carry out communication-based responsibilities. This paper has a specific focus on determining how the communication of Enron’s leaders contributed to its failure. Although the specific financial shortcomings are not fully addressed in this paper, the corporate communication and culture dictated the intentions of these shortcomings and therefore can be held responsible. Before attempting to analyse the concepts of Seeger and Ulmer some background information about Enron and ethics will be explored. The key leadership figures at Enron were Kenneth Lay chief executive officer (CEO) and founder, Jeffery Skilling President and Andrew Fastow chief financial officer (CFO) (Seeger & Ulmer, 2003 p. 67). Not only are these leaders prime examples of...
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...Houston, Texas that deals with the energy trade on an international and domestic basis. It was formed in 1985 when Houston Natural Gas merged with InterNorth. After several years of international and domestic expansion involving complicated deals and contracts, Enron was billions of dollars into debt. All of this debt was concealed from shareholders through partnerships with other companies, fraudulent accounting, and illegal loans. Enron was created by a merge between Houston Natural Gas and Internorth. Houston's Natural Gas's CEO Kenneth Lay headed the merger of the two companies. Kenneth Lay became the CEO of Enron. Enron was originally solely involved with the distribution and transmission of electricity and gas in the United States. In the merger, Enron incurred a large amount of debt, and as a result of deregulation, no longer had exclusive rights to its pipelines. The company had to find a way to generate profits and cash flow. Kenneth Lay hired Jeffrey Skilling to work for Enron as an accountant. Skilling suggested the practice of buying gas from a network of suppliers and selling it to consumers at a fixed price with a contract. Enron was interested in the expansion, building, and operation of pipelines, power plants, and other infrastructure worldwide. After just a year of operation Enron merged with a company called Spectrum Seven, a company whose chairman and CEO is the former president of the United States, George W. Bush. In 1999, Enron tried to expand their company...
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...misrepresentation of data by Enron to make the company look like it was a prospering company with false information. When the walls came falling down it shined light on how Enron could misrepresent themselves by the help of Arthur Anderson. 3) The chief financial officer, Andrew Fastow, created problems that led to Enron’s financial issues by inflating Enron’s profits which led to 98 federal counts. He was charged with fraud, money laundering, conspiracy, and obstruction of justice. As he inflated numbers, people would invest into the company, losing their money eventually and unknowingly to pay for the high end employees of Enron. The company, for most employees, did not know what was going on besides for the high profile employees like Fastow, Lay, and Skilling. This was all created to grow stock prices for Enron and hide its massive debt and enriching top board members with...
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...economics, accounting, or business. For many, the name Enron evokes harsh feelings and leaves a sour taste in the mouth. For those who are not familiar with Enron, a few key terms might be helpful in understanding the type of business Enron was: Deceptive, Dishonest, Insolent, Corrupt, Blatant Disregard for Humanity, and Business Failure. Enron strategically and criminally manipulated market-to-market accounting, where projected earnings were allowed in the profits reported; however, market-to-market accounting was not necessarily the problem. The problem lay in the carefully crafted deceptive projections by top executives, which initially no one cared to question. This allowed Enron’s stock price to maintain elevated, even though the money was never there. Enron Oregon Corp. and Enron Corp., a Delaware corporation merged on July 11, 1997, surviving entity, Enron Corp. Recorded puppeteers at the time: Kenneth L. Lay, Chairman of the Board/Chief Executive Officer and Director/Principal Executive Officer; Richard A. Causey, Senior Vice President/Chief Accounting and Information Officer/Principal Accounting Officer; Andrew S. Fastow, Senior Vice President/Finance and Treasurer/Principal Finance Officer; Jeffrey K. Skilling, Chief Operating Officer; and several directors. Shortly after the merger, a few incredibly intelligent, but dishonest individuals were hired on or due to varied business connections came...
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...Mainly four parties were responsible for this crisis. First one is Kenneth Lay, the former chairman of the Houston Natural Gas. Lay as chief executive wanted to make Enron as the world’s greatest company. Lay was responsible for the crisis as approval of the actions of Skilling and Fastow was done without inquiring about the details. He was also involved by making false statement to the auditors, bankers, indulging in wire frauds, conspiracy, money laundering and securities fraud. Moreover, he was a hippocrat who announced to investors to buy the stock as it is predicted to reach a level of more than $130 and at this point he sold his shares knowing the financial crisis of the company. Moreover he appointed Skilling on the condition to use mark-too market accounting that will foster company to book profit as soon as deal was signed irrespective of the success of the project. As the CEO of the seventh largest company he had direct access to the political and government authorities like G.W.Bush. The second individual responsible for the crisis was Jeffrey Skilling. He was hired by the Kenneth Lay to help him as his top subordinate. Skilling was responsible to develop and implement plans to transform Enron to a energy trading company i.e. to act as intermediary between the energy products producers and the users of these products. The third individual responsible for the crisis is Enron’s chief financial officer Andrew Fastow. He was involved in frauds, insider trading, money...
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...Impacts of Unethical Behavior Unethical behavior is among us everywhere, and in an accounting career it is somewhat one of the easiest parts of a company or organization that a person can commit fraud. It would be easy for an accountant who controls the books and write the checks to push money around, leave things off the books, and write checks to put money into their own hands. ENRON is a prime example of fraud being committed in a company. They not only caused the company to go bankrupt, but shareholders lost $74 billion, employees lost their jobs and retirement accounts were lost as well. ENRON is energy, commodities and service corporation based out of Houston, Texas. They committed many fraudulent crimes in which one was practically given to them by the government. Most organizations are regulated by the government. Financial regulation is a type of regulation or supervision that holds an organization to certain requirements, restrictions and guidelines which is aimed at maintaining the integrity of the financial system. Its’ objectives are to keep market confidence, financial stability, consumer protection and reduce financial crimes and unethical behavior. However, ENRON filed for deregulation, in which when it was granted, the executives were able to hide and not divulge certain items such as losses, which had investors wanting to invest in that company since it looked to be so profitable. However, this lead to a bigger scandal in which finance...
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...Enron Scandal: Who did what? What went down between Fastow, Lay, Skilling, and Causey? Dillon Benjamin Lock Haven University Enron operated one of the largest natural gas transmission networks in North America, totaling over 36,000 miles (Frontain, 2002 p. 1). The company was formed in 1985 when InterNorth purchased Houston Natural Gas (McLeon, 2013, p. 1). According to Frontain (2002), “Enron managed the world’s largest portfolio of natural gas risk management contracts and pioneered innovative trading products” (p. 1). By the year of 2000 Enron was the 7th largest corporation in the United States” (McLeon, 2013, p. 1). That is who and what Enron was before everything came crashing down. Enron employed sketchy and misleading accounting practices to hide its financial losses (McLeon, 2013, p. 1). Under Jeffrey Skilling the trading operation adopted market-to-market accounting in which the present value of anticipated revenue is realized and the expected costs of fulfilling the contract are expensed once a contract is signed (Frontain, 2002, p. 2). Enron got into trouble in 2001 when Arthur Anderson, Enron’s outside auditor, correctly accounted one partnership deal that created severe quarterly losses (Frontain, 2002, p. 2). According McLeon (2013), “Those losses and subsequent profit and debt restatements caused Enron's stock price to drop, triggering the unraveling of the partnership and resulting in a sudden and dramatic financial collapse. This event led them into...
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...Based on the documentary several control issues were observed. They were: * During the Enron oil scandal aka the Valhalla scandal there was significant misappropriation of monies. In this particular situation instead of reducing risk lay encouraged traders to keep gambling more. Traders gambled away all of Enron’s reserves and this was covered up by Muckleroy who was able to bluff the market by acting quickly. * Ken Lay didn’t listen to auditors’ reports that the two rogue traders should be fired, this demonstrated one angle of lack of a good management style and monitoring. Instead lay read the report and read his budget and estimated how much the rogue executives made and if they were fired what he could lose. With all of this in mind lay did not fire the executives and had been described as a guy that puts earnings before scruples rather than reacting to the dishonesty in front of him. * Ken Lay as CEO of Enron made the statement that he is not responsible for things he didn’t know. This demonstrates lack of good control environment as well as bad information and communication. As if Lay is going to take this stance, what does that mean for investors, stakeholders, all persons with interest in the company. [It is known that Ken Lay was aware of what was taking place in Enron] * There were inadequate controls within Enron, as there was a lot of management...
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...Business Research Ethics We are going to looking at the Enron Scandal to see how this company’s unethical behavior brought it to an end, to see who were the injured parties; to see how this company’s unethical behavior affected the company and society, and to see if the unethical behavior could have been avoided or resolved? According to the New York Times (2002), in early 2000, Enron, the natural gas pipeline company turned online phenomenon, held a daylong conference in Huston for Wall Street analysts and investors. The audience, packed with financial experts on the natural gas and power industries, was wowed by all the talk of Enron’s online capabilities, especially its rapidly growing business of electronically matching buyers and sellers of numerous commodities like electricity and even network bandwidth. To keep its mystique alive and its stock price growing, it set up partnerships where it could bury its losses, or generate imaginary revenues. Here's one of the more audacious examples, pieced together by The Wall Street Journal: Enron invested a bunch of money in a joint venture with Blockbuster to rent out movies online. The deal flopped eight months later. But in the meantime Enron had secretly set up a partnership with a Canadian bank. The bank essentially lent Enron $115 million in exchange for Enron's profits from the movie venture over its first 10 years. The Blockbuster deal never made a penny, but Enron counted the Canadian loan as a nice, fat...
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...ETHICAL FAILURE: Enron Corporation Submitted by: Ishani Rawat 61 Niharika Agarwal 68 Poonam Singh 72 Ruchika Singh 77 Background Once the seventh largest company in America, Enron was formed in 1985 when InterNorth acquired Houston Natural Gas. The company branched into many non-energy-related fields over the next several years, including such areas as Internet bandwidth, risk management, and weather derivatives (a type of weather insurance for seasonal businesses). Although their core business remained in the transmission and distribution of power, their phenomenal growth was occurring through their other interests. Fortune Magazine selected Enron as "America's most innovative company" for six straight years from 1996 to 2001. Then came the investigations into their complex network of off-shore partnerships and accounting practices. What Happened? On April 17, 2001, Enron announced a 281% in revenues and a 20% increase in net income. Its stock was trading near $60. Things began to fall apart in October, however, when Enron reported an adjustment in earnings of over $1 billion in its SEC filings, resulting in a $618 million loss for the third quarter...
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...and doing other risky behavior that no other businessman would do. Other business men weren’t interested in doing activities like that but Jeffery Skilling broke the mold and showed the world he enjoyed doing these unconventional activities. All the leaders at Enron provided a strong vision especially Jeffery Skilling who brought with him many ideas when he first entered the company. He wanted to recreate the industry and wanted to trade energy more like a stock market. He brought these ideas in and everyone listened to him because all these ideas were revolutionary at the time. These leaders showed that they had personal risk because Ken Lay had always mentioned how they have a stake in everything that occurs since they all invest in the company they run. People saw how these men took risk in their own stock so they followed. Ken Lay also wanted to let everyone know that what they did was always for the stock holders and he showed sensitivity to his followers with that claim. 2. Communication was one of the big problems with Enron’s problems. There was rarely any downward communication that was real. The major leaders of Enron kept all the problems with profits to themselves and left the shareholders with no information. This barrier of communication they put up was filtering since they only put out the good information which wasn’t necessarily true information. The upward communication that was occurring was usually filtered as well since many of the traders wanted...
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...instructor’s name, the course title, and the date. Describe how Enron could have been structured differently to avoid such activities. Using computers, the Internet, and other resources, research the activities of the Enron Corporation (Enron), its officers, and its agents (auditors and sellers of securities). Using all the material presented thus far in the course, analyze the activities you researched. The Enron Corporation was an American energy company, which since its merger in 1985 with two other natural pipeline gas companies Houston Natural Gas and InterNorth failed to structure a corporation built around strong ethics and accordance with the law. It would be fair to predominantly commence by attributing Enron’s founder Kenneth Lay and Chief Executive Officer (CEO) Jeffrey Skilling for the foundation of Enron’s illegal depiction of it’s financial operation. At the same time under certain common laws a case arguably can be made for the senior executives or officers to established whether the Enron officers were equally responsible for their participation in the organization’s...
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...The Enron Corporation Scandal Yolanda M. Allen Business Law I/LEG 100 Strayer University Instructor: Prof. Bryan Smith 20 August 2011 The Enron Corporation Scandal Describe how Enron could have been structured differently to avoid such activities. The origins of Enron started with the merger of Kenneth Lay’s company, Houston Natural Gas with InterNorth, a Nebraska-based pipeline company in 1985. Initially, from the beginning, Enron began to show some cracks in its structure, as the company started acquiring huge amounts of debt during its foundation, and as a result of the deregulation of gas pipelines, it no longer had exclusive rights to its own pipelines (Thomas, C.B., 2002). To solve Enron’s credit and revenue problems, Kenneth Lay, CEO hired Jeffrey Skilling, who eventually became the company’s Chief Financial Officer to the CEO in 1996. Almost overnight, Skilling turned Enron into a major market middleman for energy that would dominate the trading market. After many years of seemingly huge successes, more cracks began to appear in the Enron crown. In the final analysis, the conspiracy of Lay, Skilling and others led to the collapse of the company due to fraud, false reporting of revenue, shoddy accounting practices and a general disregard for virtually every tenet of business ethics. Building a robust ethics infrastructure that is self-sustaining, by composing a sound code of conduct that supports the top level, and communicating it to all employees...
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...based on the book by Fortune Magazine reporters Bethany McLean and Peter Elkind, opens with a reenactment of the suicide of Enron executive Cliff Baxter, then travels back in time, describing Enron chairman Kenneth Lay's humble beginnings as the son of a preacher, his ascent in the corporate world as an "apostle of deregulation," his fortuitous friendship with the Bush family, and the development of his business strategies in natural gas futures. The film points out that the culture of financial malfeasance at Enron was evident as far back as 1987, when Lay apparently encouraged the outrageous risk taking and profit skimming of two oil traders in Enron's Valhalla office because they were bringing a lot of money into the company. But it wasn't until eventual CEO Jeff Skilling arrived at Enron that the company's "aggressive accounting" philosophy truly took hold. The Smartest Guys in the Room explores the lengths to which the company went in order to appear incredibly profitable. Their win-at-all-costs strategy included suborning financial analysts with huge contracts for their firms, hiding debts by essentially having the company loan money to itself, and using California's deregulation of the electricity market to manipulate the state's energy supply. Gibney's film reveals how Lay, Skilling, and other execs managed to keep their riches, while thousands of lower-level employees saw their loyalty repaid with the loss of their jobs and their retirement funds. The filmmaker posits the...
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...Parth Vyas Econ- 312 Enron bankruptcy Enron Corporation was an American energy company based in Houston, Texas, United States. His company was formed in 1986 through the merger of two natural gas pipeline firms, Houston Natural Gas. Enron started out as a natural gas company put together by Kenneth Lay. Enron's natural gas pipeline brought the company much success. Supplying natural gas was a lucrative business. Enron senior management falsified accounting records to make it look like they made a lot more money than they actually made. Stock prices don't continue to rise unless Net Income is increasing every quarter and every year. Enron did a fraud in stocks. Enron established to shield itself from mark-to-market losses in its growing equity investment business. Enron and all publically traded companies are required to report on their finances to the public and to the Securities and Exchange Commission who regulates financial reporting over publically traded companies. The problem for Enron was that after some successes the traders began to have some financial failures and Enron was no longer really making a profit. The market traders, who were effectively just high-stakes gamblers, were no source of profits but instead a major source of loss themselves. People formerly involved with the company, such as creditors, auditors, the SEC and accounting regulators, it’s a nightmare for them. Enron essentially failed because the executives did not want to admit defeat. They had...
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