...A Business Failure: Enron Chris Shealy LDR/531 August 22, 2011 Ericka Hilliard The Enron scandal was a corporate scandal involving the American energy company Enron Corporation based in Houston, Texas and the accounting, auditing and consultancy firm Arthur Andersen that was revealed in October 2001 (Wikipedia Enron Scandal 2001). All of this started when there was a loophole discovered in the accounting department when they were allowed to book large sums of money from energy-derivative contracts at their gross value and not their net value. This tactic although legal many analysts and investors saw what Enron was doing. This was called the distorting technique which allowed Enron to become one of the largest companies in the world. All of the hiding came from within Enron’s balance sheet. To let you in on Enron’s hidden success, Enron was allocating all of there money to independent private partnerships. This strategy showed that Enron’s market share was sky-rocketing to levels never seen before. The thing that was kept hidden was Enron’s asset and liability portfolio. Between 1996 and 2001, Enron reported an increase in sales from 13.3 billion to 100.8 billion (Forbes, 2001). In 2002, there were reports starting to come out about Enron’s wrongdoing. Everyone believed at the time that the Bush administration was telling the truth about what was going on at Enron. Now that Enron is bankrupt, many still believe that there was ever any wrongdoing at Enron....
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...Business Failure in Enron and The Organizational Behavior Theories That Explain the Company’s Failure Name: Institutional Affiliation Enron Corporation was one of the world’s top electricity corporations that underwent a financial indignity, which involved Enron and its bookkeeping company. The scandal comprised of the detection of unbalanced accounting techniques, which occurred through the 1990s. This resulted in Enron filing for insolvency in December of 2001 (Thomas, 2002). The aim of this paper is to define how organizational behavior theories could have anticipated or illuminated Enron’s failures. Organizational behavior, is described as an area of study that explores the influence that groups, individuals, and structure have on performance inside the organizations for the aim of applying such information toward refining an organizations efficiency; precisely organizational behavior concentrates on how to increase output; decrease absenteeism, turnover and unusual workplace conduct; and raise organizational loyalty behavior and job fulfillment (Robbins & Judge, 2007). The key players of any business are senior management, board of directors, in-house auditors and external auditors. In case of Enron, all the stakeholders were unsuccessful in playing their parts. Enron failure was mainly because of Enron’s managerial team trying to make an enterprise which would raise riches amongst their owners. Nevertheless, when it was exposed that Enron’s stock prices were less...
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...The Enron Business Failure 1 The Enron Business Failure The Enron Business Failure 2 The Enron Business Failure The company selected for intense scrutiny on leadership failure and ultimate business catastrophe is Enron. Enron had a very rich history of success and innovation in the industrial market of energy production and delivery. An important note to identify, Enron was named “America’s Most Innovative Company” (Lordan, 2002) for six straight years. This title sheds a great deal of light on the success and adaptability that was projected during the lifetime of Enron. This analysis will carefully review and identify major key factors of deception that brought an end to what was once a possible trademark of American Pride. The main reasons or conventional wisdom that most people believe Enron failed was due to sloppy board oversight, critical deception in imaginative accounting, multiple occurrences in off-balance sheet financing and criminalist policies of the Chief Financial Officer. According to many leading experts in the field of the Enron collapse (Stewart, 2006) the above mentioned reasons for the collapse were merely consequences to actions rather than the actual causes that brought on these fatal occurrences. After much research and the most complex bankruptcy to date in the United States of America, the Enron Bankruptcy and failure is hinged on the premise that the company failed due to the intentional cover-up of aiming at the wrong financial measures...
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...Examining a Business Failure: The Downfall of Enron Team D: LDR/531 2012 Eric Heard In December of 2001, Enron was forced to file for bankruptcy after an investigation of their finances. This investigation uncovered a history of conspiracy, money laundering, and inside trading that led to one of the largest fraud scandals in history (Cernusca, 2011). As a result, businesses should examine exactly where this powerhouse faltered. The areas to be studied specifically are organizational structure, leadership, and management (Yuki, 2010). Once this is complete, business should learn from Enron's mistakes and be careful not repeat history. Organizational Structure's Part of the Enron Failure When looking at an organization, the structure which is defined as “how job tasks are formally divided, grouped, and coordinated” is important to fully understand the organization and how it can be an asset or in the case of Enron a failure (Robbins & Judge, 2011, p. 493). Since the fall of Enron people have studied the company to see what caused the failure. Due to Enron’s failure we have new legislation to help prevent some of the issues from happening again in other companies from the Sarbanes Oxley Act (SOX). One of the reasons for the act was the way Enron’s upper management ran the company. One key element to organizational structure is Centralization and Decentralization decision-making. This key aspect could be argued as the main...
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...Examining a Business Failure: ENRON LDR 531 Organizational Leadership December 5, 2011 . Examining a Business Failure Effective managers and leaders contribute to the organizational success of an organization. Companies lacking strong managerial leaders failing to enforce the ethical code of conduct of an organization are prone to organizational failure. Yukl (2006), states, “One viewpoint is that leadership occurs only when people are influenced to do what is ethical and beneficial for the organization and themselves” (p. 4-5). The notorious Enron scandal created a historic impact to the organizational culture and processes of businesses in the United States. The following paragraphs will address organizational behavior theories, which could have predicted Enron’s failure. Furthermore, a comparison of management, leadership, and organizational structures is scrutinized to determine the influence each had on Enron’s failure. Who was ENRON? Enron was founded in 1985 when Kenneth Lay merged Houston Natural Gas and InterNorth creating Enron (CBCNews, 2006). In the early 1990s Kenneth Lay commenced the sale of electricity at reasonable prices. However, Congress deregulated sales of natural gas. As a result, Enron’s earnings increased and became the largest retailer of natural gas. To expand, Enron diversified and incorporated gas pipelines, pulp and paper, broadband services, water, and electricity plants. Furthermore, the deregulation allowed Enron executives...
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...Running Head: ENRON BUSINESS FAILURE Examining a Business Failure Paper Enron Rachel Y. Pointer University of Phoenix LDR/531 Ernest Price, Instructor January 17, 2010 Enron Business Failure One of the world’s most catastrophic business failures was Enron. Unveiled in October 2001, this scandal involves the renowned energy company Enron in conjunction with the accounting, auditing and consultancy schemes of Arthur Andersen. Enron disgraces ultimately lead the organization to a scandal that resulted in the biggest economic failure in United States history (TIME Enron, 2001). The Enron scandal also destroyed one of the foremost accounting agencies in the world, Arthur Andersen. Enron’s downfall was the result of their choice of accounting practices, in particular target entities and poor financial reporting. Enron’s accounting structure had so many loopholes that it was unproblematic for Andrew Fastow, the organization’s chief financial officer, to mask billions in debt from failed transactions and schemes. Fastow and other main executives purposely misinformed the organization’s board of directors and audit commission. The U.S. Securities and Exchange Commission (SEC) began an investigation into Enron after the organization’s stock price began to plummet and Dynegy offered to purchase Enron at a price much lower than normal market price. When the Dynegy deal did not happen, Enron filed for bankruptcy on December 2, 2001 under Chapter 11 of the...
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...ENRON- A Study of FAILURES Who, How, Why! Arthur Gudikunst, Ph.D. Revised: April, 2003 Professor of Finance Finance Department Bryant College Introduction: The saga of the ENRON Corporation has been unfolding in the media for well over a year. In the span of only three years, ENRON has gone from public and professional acclaim of the company and its senior executives to scorn, infamy and bankruptcy. Its public auditing firm, Arthur Andersen, has basically been destroyed, as well as publicly disgraced. Tens of thousands of employees and investors have been emotionally and financially affected. Major financial services firms in banking, securities brokerage and insurance have been, and may yet be, drawn into the legal battles regarding who is to blame for the ENRON failure. Overview of ENRON: The following timeline for ENRON is presented to set the major milestones for the company: July 1985- Houston Natural Gas merges with InterNorth to form ENRON, as an interstate natural gas pipeline company. Kenneth Lay is CEO. 1989- ENRON starts trading natural gas commodities and commodity derivative financial contracts. 1994- ENRON begins trading electricity as a commodity and related financial derivative contracts. Jeffrey Skilling is executive in charge of this new business venture. Nov. 1999- EnronOnline is launched as a web site for the global trading of energy commodities and derivative contracts. Jeffrey Skilling leads this continued transformation...
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...Enron's Business Failure Abstract Business practices based on fraud and unethical behaviors can collapse a fortune 500 company. An important element in deciding a business’s success or failure is the structure and behavior of its key leaders. Enron was a successful corporation claiming revenues of almost 100 billion dollars and named in Fortune magazine as America’s most innovative company for six consecutive years. In this paper, specific organization theories can predict and explain Enron’s failures because of greed, lack of business ethics, and deception in what is considered one of the largest corporate scandals of the decade. Enron's Business Failure In July 1985, Houston Natural Gas merged with InterNorth forming the largest energy trading business called Enron (Thakur & Kalra, 2003). Based in Houston, Texas, Enron was a leading supporter of restructuring energy markets in the United States. Growing from a natural gas pipeline company into a marketing giant, Enron managed to build a large and successful organization consisting of more than 20,000 employees and boosting annual revenues of more than $100 billion. Despite Enron’s years of reported success; exposure of deceit, poor managerial business practices, and illegal activities of its key leaders led to the collapse of this marketing giant once known as the largest players in the energy trading business (Electric Power Supply association, 2012). Organizational behavior is the study and application of...
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...Managerial Organization LDR/531 March 23, 2013 Managerial Organization One of the world’s leading electricity companies, Enron Corporation, suffered from a financial scandal, which involved the corporation and its accounting firm. The scandal happened during the 1990s and was a result of irregular accounting procedures. This scandal caused Enron to file bankruptcy in December 2001 (Thomas, 2002). The subject of this paper will discuss how organizational behavior theories could have predicted or explained Enron failure. This subject of this paper will also compare and contrast the contributions of leadership, management, and the organizational structure of Enron, which to the corporations failure. Organizational Behavior Organizational behavior is the field of study that investigates the impact that individuals, groups, and structure have on behavior within the organizations for the purpose of applying such knowledge toward improving an organizations effectiveness; specifically organizational behavior focuses on how to improve productivity, reduce absenteeism, turnover, and deviant workplace behavior, and increase organizational citizenship behavior and job satisfaction´ (Robbins & Judge, 2007). Organizations have a structure that consists of board of directors, senior leadership, external auditors, and internal auditors. The CEO runs the company, but board of directors and senior leadership are also involved in the decision-making process. Monitoring the corporations...
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...ENRON’S FAILURE RESEARCH #1 Failure of Enron Corporation Enron Corporation, called America’s most innovative company for six consecutive years by Fortune Magazine, was the world’s leading energy company. Enron was formed in 1985 by a merger of Houston Natural Gas and InterNorth, involving the transmission and distribution of electricity and gas throughout the United States, but majority of its growth was due to the pioneering marketing and promotion of power and communication bandwidth commodities as well as its related risk management derivatives (Columbia Electronic Encyclopedia, 2009). Under new leadership Kenneth Lay and Jeffrey Skilling, Enron adopted an aggressive growth strategy. To ‘seal the deal’, they hired Andrew Fastow as CFO and it was he, that helped to create the complex financial structure for Enron (Reinstein & Weirich, 2002). One could say that Enron began to plummet as soon as the company shifted its focus from regulated natural gas domestically to international energy, water and broadband communications – as these were volatile and risky hedging transactions (Reinstein & Weirich, 2002). Engaging in these risky transactions, enabled Enron’s stock to rise but when these three new areas went sour, the stock plummeted as well. Enron’s management did not disclose these losses and liabilities on their financial records nor to the investors of the corporation (Reinstein & Weirich, 2002). Despite Enron being called the most innovative and having alleged...
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...The Demise of Enron university of phoenix LDR531 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...
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...Business Failure Enron xxxxxxxxxx University of Phoenix Online February xx, xxxx xxxxxxxxxxxx Examining a Business Failure: Enron This paper will discuss the contributions of leadership, management, and organizational structures that led to the demise of Enron. The structures will also be compared and contrasted to help better understand why the company failed. Enron Corporation was founded in Omaha Nebraska 1985 and was defunct on December 2, 2001. In the year 2000 Enron had published revenues of $101 billion and employed approximately 22,000 employees. The Company’s founder and CEO was Kenneth Lay Other notable people who lead Enron where Jeffery Skilling, Andres Fastow, Rebecca Mark-Jusbasche. Fortune magazine nominated Enron as “Americas Most Innovative Company” for six consecutive years. At the end of 2001 it was discovered that Enron had been creatively distributing its debt through fraudulent planned Accounting making the company seem very profitable in previous years ("Enron", 2012). Leadership, Management, and Organizational Structures (contributed to the failure) Leadership has many different definitions; one definition is “the behavior of an individual directing the activities of a group toward a shared goal. (Hemphill & Coons, 1957, pg 7). This definition is closely is related and applies to Enron’s leadership, Management and structure. Enron’s leadership...
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...Enron and Apple – A Financial Tale of Failure and Success Enron and Apple – A Financial Tale of Failure and Success 2 Abstract This paper analyzes accounting concepts that contributed to Enron’s demise and inclusion on the list of Fortune’s top ten largest bankruptcy filings in US, and in contrast, looks at Apple’s inclusion on the list of Fortune’s top ten most admired companies and reason for its success. Enron and Apple – A Financial Tale of Failure and Success 3 The Fall of Enron Introduction As a Fortune 500 company, Enron Corporation made the “Fortune’s Top Ten” lists seven times: six times as “America’s Most Innovative Company” and one, and last time, as the “Top Ten largest bankruptcy in the US” (Fortune Magazine, 2001, 2009). Within 10 months, Enron’s stock declined from $83 to 26 cents. When the nation's largest energy, electricity and natural gas company filed for bankruptcy in December 2001, shareholders lost tens of billions of dollars, over four thousand employees lost their jobs, and thousands more lost their retirement savings (Ferrell, Fraedrich & Ferrell, 2011, pg 419). Enron’s History and Business Model Enron was formed in 1985 though the merger of two natural gas companies and initially earned its revenue by producing and distributing natural gas. Under the leadership of Ken Lay and later Jeffrey Skilling, the gas company evolved adding electricity, communications, and energy trading to its offerings and continued its development, construction...
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...to as the “Number 1 CEO in the entire country” and the company that he represented, Enron Corporation, was considered to be “America’s most innovative company. A short Six months later, the company filed for bankruptcy and took billion worth of shareholder money with them. The downfall of the Enron Corporation in 2001 had far reaching effects that are still felt to this day. Employees, shareholders, auditors, executives, the public and many other stakeholders are still dealing with the impact of the fallout that came from the misconduct of the debt ridden company. With the exception of a few industries, the stakeholders faced mainly negative benefits from Enron’s demise. Enron business model. Enron Corporation sketched out its roots to the Northern Natural Gas Company, in 1932 in Omaha, Nebraska. It was restructured in 1979 as the leading subsidiary of a holding company. Kenneth Lay founded Enron in 1985 through the merger of Houston Natural Gas and Internorth, two natural gas pipeline companies. The merged company owned 37,000 miles of intra- and interstate pipelines for transporting natural gas between producers and utilities. Enron the American energy company based out of Houston, Texas employing roughly 22,000 is one of the world’s largest electricity, natural gas, pulp and paper and communications companies with revenues roughly $101 billion in 2000. In Enron’s original natural gas business, the accounting had been fairly straightforward: in each time period, the company...
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...ACC 260 Week 2 The Enron and WorldCom Scandals Material A+Grade Get Tutorial by Clicking on the link below or Copy Paste Link in Your Browser https://hwguiders.com/downloads/acc-260-week-2-the-enron-and-worldcom-scandals/ For More Courses and Exams use this form ( http://hwguiders.com/contact-us/ ) Feel Free to Search your Class through Our Product Categories or From Our Search Bar (http://hwguiders.com/ ) Assignment: The Enron and WorldCom Scandals • Resource: Business & Professional Ethics • Due Date: Day 7 [Individual forum] • Review the accounts of the Enron and WorldCom scandals in Ch. 2 of the text: o Enron’s Questionable Transactions on pp. 96-107 o WorldCom: The Final Catalyst on pp. 114-118 • Answer the following questions using complete sentences: o Enron: 1, 3, 5, 6, and 9 on pp. 106-107 o WorldCom: 1, 3, 4, and 5 on p. 118 • Post your answers as an attachment. Clearly label the case and question number for each of your responses. Enron questions 1, 3, 5, 6, and 9 1. Which segment of its operations got Enron into difficulties? The first thing that got them into trouble was the fact that Kopper was appointed to Fastow and he was an employee of Enron. I do not believe that he had the best interest involved. Another thing was that over 11 million was suppose to be invested and it never was. I believe that this was the start of the problems! Another thing was the fact that Enron was incorrectly booking revenue for services that was...
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