...Enron’s Impact The movie Enron: The Smartest Guys in the Room is an informative documentary exposing an unprecedented level of corruption in the business industry. This movie is based on a book written by Bethany McLean and Peter Elkind, who are also the primary interviewees in the film. This movie captures the tragedy in an incredibly detailed and emotion-jerking way, from the beginning of Enron to the end. Enron is well known to anyone familiar with 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....
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...The Smartest Guys in the Room: The Enron Movie Magnolia Home Entertainment Reflection Questions Choose one or more of the following questions to discuss. There are no right or wrong answers. I am asking for your impression, thoughts, and critical reflections on these questions, not a yes or no. Support your answers with examples from the movie and from your own experiences or other sources. 1. Is this a story about financial numbers or is it about people and Enron’s culture? Explain. 2. We generally would think that “free” markets are preferable to regulated markets. Is Enron an exception? Why or why not? 3. To get a high return, you generally take high risks with people’s money. At what point do you say it has gone too far. 4. We are taught that “markets” are generally current in valuing things. Yet, Enron’s “mark to market” accounting is thought to be one of the problems. Why? 5. Darwin’s survival of the fittest is generally held in high regard. Yet, Enron’s use of the concept seems to have been a problem. Why? 6. How does the “tone at the top” affect the attitudes and actions of those below them? 7. Should Arthur Anderson be held partly responsible for the collapse of Enron? If so, how? 8. White-collar criminals often rationalize their fraudulent activity as “doing nothing wrong.” Are these qualities present in the Enron case? Explain. 9. Analyst opinions were based on information from the company. The validity of this information...
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...Successful Qualities When people think of Enron they most likely don’t burst full of warm fuzzy feeling, they think of rich greedy men who only cared about themselves who were arrogant and thought they could get away with anything because of how much money they had. But what happened at Enron is more than the a sad story in which people lost all their life savings, it is about men who had all the right qualities letting their need for successes overshadow all ethical behavior. The movie Enron: the smartest guys in the room, says that what happened at Enron is perceived as an issue about the numbers but that it in fact is a human tragedy. It’s a tale in which the people at the top of the company are so great at what they do that people they have the whole nation believing in them and continually buying stock. The tragedy is that they weren’t doing it in an ethical manner but even more tragic is the fact that everyone has been thought that the characteristic of Ken Lay, chairmen and CEO at Enron, and Jeff Skilling, COO at Enron, are good qualities to have. Ken Lay and Jeff Skilling were not bad people, in fact they had all the makings of great business men. Lay’s childhood is described as an unpleasantly penniless childhood, but Lay managed to work several jobs as a child wanting a better life for himself. The movie describes Lay as a dreamer of sorts by telling a story of a time he was sitting on a tractor and thinking about all he do could do in business, he was ambitious...
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...The movie centers on the Company Enron Corporation, which went Bankrupt in the year 2001 leaving hundreds of its staffs unemployed and thousands of its investors bereft. Enron Corporation was an American energy company based in Houston Texas. It was one of the leading energy companies in United States and was repeatedly named as “America’s most innovative company”. Enron was found to have used various accounting methods to misrepresent its financials. The company’s fraudulent activities brought a number of changes in the business of United States. The movie begins with a lady describing the company as one filled with arrogance, intolerance and greed which led to a gigantic fraud. Within no matter of time, the company was bankrupt. The top executives made millions by cooking the books and hiding all the materialistic information from the customers. The key players in the scandal were Chairman Kenneth Lay, CEO Jeff Skilling and CFO Andrew Fastow. Enron being the major corporate contributor for the George W. Bush election campaign stressed on deregulating the energy market. Ken Lay along with few Texas based oil companies shared a common view that deregulation is the key for success. In the early stage, traders of Enron were involved in speculating the prices of oil. While such speculations were risky, Enron seemed to own a winning streak during the initial stage. Top Executives had offshore personal accounts and transferred millions of dollars in profits. Few employees tried to...
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...FORENSIC ACCOUNTING ENRON: The Smartest Guys in the Room Movie Summary Gerald Prayogo ------------------------------------------------- 342858 Enron: The Smartest Guys in the room is a documentary movie based on the book of the same name. Essentially, it tells us about one of the biggest fraud ever performed in the US. It tells us of the downfall of Enron: its scandals, the prosecution of its perpetrators, as well as its role in California electricity crisis. The film describes the biggest names on the fraudulent corporation. First is Kenneth Lay, the founder of Enron. Kenneth, nicknamed ‘Kenny Boy’ by his spouse, got the company into scandal in just two years after its establishment, after Enron’s managers bet on oil markets. The second is Jeffrey Skilling, the man who utilized mark-to-market accounting, which allow Enron to appear as being a profitable company, even if the reality might not be so. He also applied the Darwinian philosophy on Enron by establishing a ‘rank and yank’ system, a system of which a group of review commitees grades employees and fires the bottom fifteen percent. Skilling was also described as having a soft spot for “guys with spikes”; which made him recruit J. Clifford Baxter, a manic-depressive; and Lou Pai, the CEO of Enron Energy Services which was known for using shareholder money to pay strippers. Enron managed to get a myriad of profits during the dot-com bubble by using the process known as “pump and dump”: pushing up their stock prices and...
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...Alexis Isbell 11/1/2012 Case Project The Enron Scandal Near the turn of the 21st century, a seemingly large Dallas-based gas company sent a shockwave around the world in what would become known as the Enron scandal. The Enron scandal would cause many people to not only lose their jobs and their ways of life, but it would also cause people to become weary of these incredibly large companies. The Early Years (1985-early 1990’s) Enron was the brainchild of Kenneth Lay, when he brought about the merger of Houston Natural Gas and Omaha-based InterNorth. Enron Corporation created the first nationwide gas pipeline network in America, and would continue to grow throughout the 1990’s. In the early 90’s, after the United States government deregulated natural gas, Enron started growing into an extremely large company, whom employed over 21,000 workers. Enron would continue to grow into the nation’s seventh largest company. Enron’s profits skyrocketed through the roof once they were able to freely sell and buy natural gas in the United States. Enron would continue to grow into one America’s most profitable companies in the late 1990’s, but the argument could be made that is what possibly led to their drastic, and frankly embarrassing downfall. The Later Years (mid-late 1990’s – 2001) As previously stated, Enron would become one the nation’s most profitable companies in the late 1990’s. “Enron’s reported annual revenues grew from under $10 billion in the early 1990s...
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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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...There was a vast number of ethical issues raised in the movie “Enron-the Smartest Guys in the Room” but the four I am going to focus on are listed below. Art Anderson, Ken Lay and all of the other executives did a number of unethical things which ultimately brought down Enron and affected thousands of employees and their futures. The bottom line was that each and every one of them acted out of greed for the almighty dollar. 1- Encouraging employees to invest and buy stock in Enron when they knew the truth about the lack of value in the stock. As an employee you trust in your management to make the best choices both for you and for the business to succeed. Ken Lay and other executives strongly encouraged Enron employees to invest in it’s stock. They all knew that the company was not doing well and yet they encouraged others to spend their hard earned money investing in it all the while they are selling their shares of stock. Employees trusted and relied on their decisions and in the end it ended up hurting them. With Ken Lay publicly encouraging its employees and other investors to invest in Enron’s stock he is affecting their future and retirement. These employees didn’t earn nearly as much as he did and he is convincing them to invest their money into an entity that was set to fail by Lay himself. I don’t believe any proper ethical alternative action could have been taken in this situation. Of course you want your employees to have faith in the company they work for...
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...The Enron and Corporate Governance Company Enron Corporation Industry Energy Founded Omaha, Nebraska, USA (1985) Founder Kenneth Lay Employees approx. 22,000 (2000) Fate Bankruptcy, 2001 Website enron.com To write about Enron I was inspired by documentary movie “Enron: The Smartest Guys in The Room”. It explains in details how negligence and ‘cheating’ in corporate governance can lead to disaster for whole nation. The case of Enron became classical example of the company where executives can manipulate whole industry using ‘creative accounting’ and corporate governance. Enron bankruptcy is the greatest knowing corporate failure in the US from the time when the crash of numerous savings and loan institutions in the 1980s. This scandal showed the necessity for important improvements in accounting and corporate governance in the country, along with a tight control at the moral values in the culture of business in whole and of enterprises in the country. Actually, one can find a lot of reasons why this collapse happened. And there is the problem of interest between the two roles played by Mr Andersen, as auditor but also as consultant to Enron; the lack of attention shown by members of the Enron board of directors to the off-books financial entities with which Enron did business; and the lack of truthfulness by management about the health of the company and its business operations. In some ways, the culture of Enron was the primary cause of the collapse...
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...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 profit (Enron-For-Dummies New York Times...
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...Vince Trav Paper #2 April 15, 2015 The Mix of Power and Responsibility “With great power comes great responsibility”, is an infamous line from the movie Spiderman, and even though it is cliché, I’ve always found that to be very true. Power and responsibility can be explored through Phillip Zimbardo’s “The Lucifer Effect”, and how his work is related to two major financial scandals of the 21st century, which involve Enron and Bernard Madoff. In both scandals, there were people in a position of power who carried a surmounting level of responsibility, but used their power in very manipulative ways for their own personal gain. The high level executives of Enron and Bernard Madoff were on a rampant quest for money, which was the key driver that led to a lot of destruction. In doing so, both Enron and Madoff acted with major lack of responsibility. It is easy to make the assumption that the aforementioned individuals in both scandals are clearly the one’s that will be held responsible for the mess they made, but it is interesting to see how through their power they shed as much responsibility as they could on other people. Their power also had an effect on a greater scale involving their control over many people, which is relatable to Phillip Zimbardo’s work on human nature. The film, “Enron: The Smartest Men in Room”, shows how there was such a great lack of responsibility by the people involved because of their determination to make as much money as possible,...
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...The scandal behind ENRON is a subject I had heard and read briefly about but never really knew all of the details. When I watched the film, Smartest Guy In The Room, I really got the opportunity to understand what caused the fall of ENRON and the negative impacts ENRON caused. The film begins by questioning the reasons for ENRON’s fall to bankruptcy in 24 days by addressing the characteristics of Pride, Greed , Arrogance, and Intolerance which were all strong characteristics of the corporate culture at ENRON. Ultimately, the executives and employees at ENRON were blinded by money which eventually sunk their own lifeboat. The movie is definitely a story about people rather than merely addressing ENRON from a financial perspective, and tells the story of the different people behind the rise and fall of ENRON. I was amazed that ENRON was the 7th largest corporation in America with over 70 billion dollars charting the future of energy and power. I also didn’t know all the political connections ENRON had invested with the Bush family and how they were the largest contributor to G.W.Bush’s First Presidential Campaign. This was definitely an alarming point to find out and learn just how politics and corporate America really are tied together. The film talks about Kenny Lay, the founder of ENRON, who grew up poor and wanted to make wealth for himself. Lay really wanted to liberate businessmen from regulation of government and deregulate energy markets. He had a strong desire for...
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...behavior becomes the starting point. First a corporation is defined as “an association of individuals, created by law and having an existence apart from that of its members as well as distinct and inherent powers and liabilities (Webster Dictionary).” Although made up of people, being separate or apart from its members also equals unaccountability. The question of “who pays when a company goes under” is at the forefront of discussions today. Corporations are developed to serve society, meet a need or provide a service. Over the years, however, the good intentioned corporation has evolved into a greed machine that has lost site of the community that it serves and the people employed who ultimately perform the work. The steady parade of top executives confessing to engage in price gouging, tax dodges, accounting shams, employee rip-offs, and other shady unacceptable acts are coming to light daily. Unethical and illegal practices are documented from the RJR Nabisco scandals in 1988 to today’s Enron, WorldCom, Merrill Lynch, Arthur Anderson, Xerox, and endless other corporations. The world realizes now that corporate greed is not about one-bad company, but large companies in general that have adopted unacceptable guidelines for corporate behavior and an overall attitude that greed is acceptable. The bottom line, insatiable need for growth, amoral corporate behavior, expendable and exploitation of employees, and the corporate culture of classes have all led to the current issues of...
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...behavior becomes the starting point. First a corporation is defined as “an association of individuals, created by law and having an existence apart from that of its members as well as distinct and inherent powers and liabilities (Webster Dictionary).” Although made up of people, being separate or apart from its members also equals unaccountability. The question of “who pays when a company goes under” is at the forefront of discussions today. Corporations are developed to serve society, meet a need or provide a service. Over the years, however, the good intentioned corporation has evolved into a greed machine that has lost site of the community that it serves and the people employed who ultimately perform the work. The steady parade of top executives confessing to engage in price gouging, tax dodges, accounting shams, employee rip-offs, and other shady unacceptable acts are coming to light daily. Unethical and illegal practices are documented from the RJR Nabisco scandals in 1988 to today’s Enron, WorldCom, Merrill Lynch, Arthur Anderson, Xerox, and endless other corporations. The world realizes now that corporate greed is not about one-bad company, but large companies in general that have adopted unacceptable guidelines for corporate behavior and an overall attitude that greed is acceptable. The bottom line, insatiable need for growth, amoral corporate behavior, expendable and exploitation of employees, and the corporate culture of classes have all led to the current issues of...
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...The Enron scandal Tobias Pavel 910422 Mylene Encontro 850224 Chalmers University of Technology Finacial Risk, MVE220 Examiner: Holger Rootzén 2012-12-02 Göteborg This report has been written and analyzed by both group members jointly. Abstract From the 1990's until the fall of 2001, Enron was famous throughout the business world and was known as an innovator, technology powerhouse, and a corporation with no fear. The sudden fall of Enron in the end of 2001 shattered not just the business world but also the lives of their employees and the people who believed that their soar to greatness was genuine. Their collapse was followed by a series of revelations on how they manipulated their success. Introduction Enron shocked the world from being “America’s most innovative company” to America's biggest corporate bankruptcy at its time. At its peak, Enron was America's seventh largest corporation. Enron gave the illusion that it was a steady company with good revenue but that was not the case, a large part of Enron’s profits were made of paper. This was made possible by masterfully designed accounting and morally questionable acts by traders and executives. Deep debt and surfacing information about hiding losses gave the company big problems and in the late 2001 Enron declared bankruptcy under Chapter 11 of the United States Bankruptcy Code. Many factors affected Enron's surge to the top and its sudden fall. In this report we will discuss and present what we think...
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