Enron: Questionable Accounting Leads to Collapse
Enron: Questionable Accounting Leads to Collapse
The Enron Corporation was established by integrating two major gas pipelines in 1985. The Company provided products and services related to natural gas, electricity, and communications and it was one of the world’s leading organizations at these sectors with claimed revenues of nearly $101 billion in 2000. Throughout the 1990s, Chair Ken Lay, chief executive officer Jeffrey Skilling and chief financial official officer Andrew Fastow transformed Enron from an old style electricity and Gas company into a $150 billion energy company. However, after the bankruptcy of Enron, it was revealed that Enron used accounting loopholes, special purpose entities and poor financial reporting to hide billions of debts from failed deals and projects. And it was found that top executives of Enron were involved in this accounting fraud which led Enron to bankruptcy. In addition, Enron’s corporate culture also contributed to its demise. The following essay is a study of Enron’s case and an attempt to find out what went wrong for Enron. This essay would try to analyze the role of Enron’s culture, the role of its bankers, auditors and the role of chief financial officer Andrew Fastow to its bankruptcy.
The Contribution of Enron’s Corporate Culture to Enron’s Bankruptcy:
In general culture means the sum of social behaviors, beliefs, attitudes, human thoughts and creations. It affects every aspect of our lives—the way we look at things, the way we act and react and how we express our feelings (Wong). Corporate culture also indicates the same thing. Corporate culture or organizational culture has been defined as "the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization." (Charles & Gareth, 2001). Ethical and healthy competitive corporate culture can take a corporation to the peak of
The Enron Corporation was established by integrating two major gas pipelines in 1985. The Company provided products and services related to natural gas, electricity, and communications and it was one of the world’s leading organizations at these sectors with claimed revenues of nearly $101 billion in 2000. Throughout the 1990s, Chair Ken Lay, chief executive officer Jeffrey Skilling and chief financial official officer Andrew Fastow transformed Enron from an old style electricity and Gas company into a $150 billion energy company. However, after the bankruptcy of Enron, it was revealed that Enron used accounting loopholes, special purpose entities and poor financial reporting to hide billions of debts from failed deals and projects. And it was found that top executives of Enron were involved in this accounting fraud which led Enron to bankruptcy. In addition, Enron’s corporate culture also contributed to its demise. The following essay is a study of Enron’s case and an attempt to find out what went wrong for Enron. This essay would try to analyze the role of Enron’s culture, the role of its bankers, auditors and the role of chief financial officer Andrew Fastow to its bankruptcy.
The Contribution of Enron’s Corporate Culture to Enron’s Bankruptcy:
In general culture means the sum of social behaviors, beliefs, attitudes, human thoughts and creations. It affects every aspect of our lives—the way we look at things, the way we act and react and how we express our feelings (Wong). Corporate culture also indicates the same thing. Corporate culture or organizational culture has been defined as "the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization." (Charles & Gareth, 2001). Ethical and healthy competitive corporate culture can take a corporation to the peak of
References: Charles W. L. Hill, and Gareth R. Jones, (2001) Strategic Management. Houghton Mifflin. CNN Money, ‘Fastow and his wife plead guilty ‘, viewed 23 January, 2012, Dembinski P, Lager C, Cornford A & Bonvin J, “Enron and World Finance A Case Study in Ethics”, Palgrave Mcmillan, viewed 21 January, 2012 Ferrell O.C., Fraedrich J, Ferrell L, ‘Business Ethics: Ethical Decision Making and Cases’, 8th Ed., South Western Cengage Learning, pp. 419-428 Final Interim Report of Neal Batson, 2003, viewed 22 January, 2012, Levinsohn, 2003, ‘Bankers ' complicity in Enron 's fraud’, Money Library, viewed 23 January, 2012, Saporito B, 2002, ‘How Fastow Helped Enron Fall’, Time Business, viewed 23 January, 2012, Third Interim Report of Neal Batson, 2003, viewed 22 January, 2012 Thomas, W