Case Study: Accounting for Enron
Case Study 9
Kim Chau
California Southern University
MKT 86519
Dec 19, 2014
N. Papazian
Accounting for Enron
Introduction
In the case of Accounting for Enron, the case concerned one of the largest corporate bankruptcies in the US history at the turn of the 21st century. It was Enron Corporation, a one time seventh largest most successful US company, sixth largest energy company in the world, valued at over $70 Billion; they filed for chapter 11 on December 2, 2001. Just the year before, Enron posted a 57% increase in sales between 1996 and 2000. And Enron shares hit a 52-week high of $84.87 per share in the last week of 2000 (O’Leary, 2002). As the story unfolds, investors lost billions of dollars and thousands of people lost their jobs and their retirement savings (Arnold, 2013). Enron turns out to be one of the worst corruption scandals due to the deceit and fraud created by its top executives. To understand Enron’s demise is to disseminate the rationale for the collapse. How could it happen? Hence, this case study will focus on the company’s rise to fame and on the key players that fostered a Darwinian company culture which helped to enable its downfall, evaluate the consequential unethical business practices and its disastrous fallouts, discuss the impacts to industrial, social, governmental policy and the fundamental changes to how corporations conduct business today as a outcome and suggest additional safeguards to protect investors, society at large and to ensure integrity of the financial markets.
Analysis
To understand what happened with Enron is to start by understand the company’s beginnings and the key players’ roles in creating the corporate values. Enron Corporation was a merger between Houston Natural Gas Company and Internorth Incorporated during 1985. Kenneth Lay, then-CEO of Houston Natural Gas Company (HNG), engineered the merger and later became the Chairman and CEO of Enron Corporation (Free, Macintosh, and Stein, 2007). The
Kim Chau
California Southern University
MKT 86519
Dec 19, 2014
N. Papazian
Accounting for Enron
Introduction
In the case of Accounting for Enron, the case concerned one of the largest corporate bankruptcies in the US history at the turn of the 21st century. It was Enron Corporation, a one time seventh largest most successful US company, sixth largest energy company in the world, valued at over $70 Billion; they filed for chapter 11 on December 2, 2001. Just the year before, Enron posted a 57% increase in sales between 1996 and 2000. And Enron shares hit a 52-week high of $84.87 per share in the last week of 2000 (O’Leary, 2002). As the story unfolds, investors lost billions of dollars and thousands of people lost their jobs and their retirement savings (Arnold, 2013). Enron turns out to be one of the worst corruption scandals due to the deceit and fraud created by its top executives. To understand Enron’s demise is to disseminate the rationale for the collapse. How could it happen? Hence, this case study will focus on the company’s rise to fame and on the key players that fostered a Darwinian company culture which helped to enable its downfall, evaluate the consequential unethical business practices and its disastrous fallouts, discuss the impacts to industrial, social, governmental policy and the fundamental changes to how corporations conduct business today as a outcome and suggest additional safeguards to protect investors, society at large and to ensure integrity of the financial markets.
Analysis
To understand what happened with Enron is to start by understand the company’s beginnings and the key players’ roles in creating the corporate values. Enron Corporation was a merger between Houston Natural Gas Company and Internorth Incorporated during 1985. Kenneth Lay, then-CEO of Houston Natural Gas Company (HNG), engineered the merger and later became the Chairman and CEO of Enron Corporation (Free, Macintosh, and Stein, 2007). The
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