...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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...reports to hide what they didn’t want investors & employees to see as well. Senior executives cashing out their stocks to make millions for themselves and telling the rest of the company that they cannot cash out theirs, that it’s for the sake of the company to keep being invested. At the cost of the employees and investors, the executives were unethical, breaking the rules of the SEC and seek to gain it all for themselves, this is “self-interest” and illegal. They knew what they were doing, especially when it was reported by an Enron accountant saying she was “incredibly nervous that we will implode in a wave of accounting scandals.” They never warned employees or the public of their problems, but instead Chairman Ken Lay lied to the staff. A distribution email was sent by him to the staff stating, “Our performance has never been stronger; our business model has never been more robust; our growth has never been more certain…I can...
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...I. Transformational leadership = ideally in transformational leadership, everyone, leaders, followers, and organizations, change. They transform. II. Leaders interact with followers with respect to their “emotions, values, ethics, standards, and long term goals, and includes assessing followers’ motives, satisfying their needs, and treating them as full human beings” (Northouse, 2007). III. All leadership theories are about influence. Transformational leadership is about influence that encourages followers to go well beyond what is normally expected of them because: (a) it makes individuals’ aware of how significant the results of their efforts are (moral purpose), (b) it emphasizes the interests of the team, the organization over self-interest, and (c) it motivates subordinates to take care of needs that operate at a higher level (Bass, 1985; Yukl, 2006). IV. It’s about improving each follower’s performance and helping followers develop to their highest potential (Avolio, 1999; Bass & Avolio, 1990). In addition, transformational leaders move subordinates to work for the interests of others over and above their own interests (moral purpose) and, in so doing, cause significant, positive changes to happen for the good of the team and organization (Dubrin, 2007; Kuhnert, 1994). V. Burns (1978) differentiated between transactional and transformational leadership. a. Transactional leadership emphasizes exchanges ( transaction) between followers and leaders. b. Transformational...
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...Two weeks into the trial of Enron founder Kenneth Lay and former chief executive Jeffrey Skilling, the defense's strategy so far has been clear: Undermine the credibility of the government's witness and barrage the jury with a deluge of complicated and, sometimes, mind-numbing corporate conference calls in an effort to show the defendants were unaware of any corporate chicanery at the company. Skilling gets 24 years Lessons from Enron: Just say 'sorry' Meet the players It's a strategy that defense teams have widely used in the recent corporate trials ranging from HealthSouth (Research) to WorldCom with mixed results. But with Enron -- the granddaddy of all cases of corporate malfeasance -- Lay and Skilling's dynamic duo of defense attorneys, Houston-based Michael Ramsey and Los Angeles-based Daniel Petrocelli, are taking their defense one step further. The attorneys contend that not only were the defendants unaware of any wrongdoing but, with the exception of a few bad apples, Enron never committed any fraud. They blame negative publicity, courtesy of the former CFO Andrew Fastow's questionable side deals, and a lack of market confidence in the post-bubble environment for the company's implosion in December 2001 -- an event that sparked billions of dollars in losses for investors and paved the way for a slew of corporate scandals. A brilliant but risky defense "It's a tough thing to sell," he said. "If the prosecutors can prove the fraud occurred and the defense lawyer insists...
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...Enron Committed Suicide Name Leadership/LDR 531 April 11, 2011 Instructor Enron was considered the major player in energy and considered as one of the most successful companies until it collapsed in 2001. Failure of this company did not only affect the employees and stakeholders, but also it had a negative impact on the United States economy. Public scrutiny of Enron’s failure, through legal battles, revealed how the toxic organization leadership and culture were two of the major reasons the world’s top energy company collapsed. In this paper, the subject to be examined is how Enron’s organizational structure, culture, and the major contributors contributed to its failure. Enron’s Failure “Originally a gas pipeline company, it metamorphosed into the world's largest trader in gas, electricity, water, and all sorts of post-modern commodities such as bandwidth” (Gutman, 2002, p. 1). It appeared that Enron was one of the most successful companies in the United States. Share prices were doing well in the stock market, and the share value consistently grew, making them very attractive. The company’s growth was perceived as genuine until the company suddenly collapsed, leading to a disclosure of a scandal that involved the top leadership of the company. The scandal that led to the failure of Enron did not happen overnight. The failure was rooted in the company’s unethical leadership (Weidlich & Calkins, 2006). Enron’s fast rise to the largest energy management...
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...1. Explain the concept and rationale behind mark to market accounting and it’s significance to Enron. When the President of Enron, Kenneth Lay, hires new CEO Jeffrey Skilling, a very energetic and a “dreamer” who joins Enron on the condition that they utilize mark-to-market accounting, allowing the company to book potential profits on certain projects immediately after the deals are signed. To keep its stock price going up par example Enron began a venture that might make $50 million 10 years from now, it could claim the $50 million as current income. However, this projects turn out to be successful. This gives Enron the ability to subjectively give the appearance of being a profitable company even if it isn't. 2. Describe the Enron culture. The culture of Enron was very competitive and all the employees had the same attitude of their bosses. Par example Jeffrey Skilling imposes his idea on Enron by establishing a review committee that grades employees and annually fires the bottom fifteen percent. This creates a highly competitive and brutal working environment. 3. What is Andy Fastow's significance to Enron? Andy Fastow’s was the Enron’s CFO. He helped the company, hiding the losses with a “Tom Ponzi’s scheme”. One of Enron tactic was to create phony offshore corporate shells and move their losses to those companies, which were off the books. The film shows a schematic diagram tracing the movement of debt to such Enron entities. Two of the companies are named "M....
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...Ethics in Strategic Planning Roger Fair MGT/498 November 23, 2015 Eligah King Ethics in Strategic Planning Ethics and social responsibility is essential to any company, no matter how size. Ethics dictate the actions and decisions of every individual in a company or firm. Ethical standards are set by the owner or CEO and filter down through the rest of the company. The owner’s, or CEO’s, behavior toward employees, customers, the community, investors, and vendors affect the behavior of his employees. The employees look to the CEO to set the standard. “Observing high ethical standards is sound business strategy -- resulting in customer loyalty, higher employee retention and a positive image in the industry and within the community” (Hill, 2015). One of the most well known companies that did not live up ethical standards was Enron. Ethics come into play on many fronts. When developing a strategic plan ethics must be considered from the earliest stages. If it is the first or the last plan that a company develops does not matter. Long term plans and visions must take into consideration what the ethical base of the mission statement will be. A company that does not take ethics into consideration during the earliest stages of planning opens itself up for failure. It is also important to create a code of conduct to provide direction about how employees should act in situations they may encounter. Ethical choices can sometimes be personally challenging because adhering to a high...
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...Enron Corporation 1. Why did the company collapse? Enron In order to understand what happened within the company we need to start with its origins. Enron Corporation Inc. (later became Enron) begun operating in Huston Texas in 1985. It started from a merger of two natural gas companies, becoming the largest commercial, natural gas pipeline operating in the United States at that time. Throughout Enron’s humble beginnings it generally centred in the delivery of gas to utilities or businesses at market price. When the deregulation of the business markets emerged Enron’s role changed, they begun to act as energy brokers. Enron entered into contracts with the sellers (natural gas wholesaler) and signed the contract with the buyers (gas utility distributors). Enron then transitioned from an old-line energy company with pipelines and power plants, to a high tech global enterprise that traded energy contracts like commodities, launched into new industries like broadband communications, and oversaw a multi-billion-dollar international investment portfolio. Enron’s key corporate achievements during the 1990s was creation of an online energy trading business that bought and sold contracts to deliver energy products like natural gas, oil or electricity. It operated in over 40 countries and areas such as Europe, South America, Australia basing its main operations in the United States. Enron was only competing with a few major players in the recently deregulated industry and begun to design...
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...Enron Company James Miles September 28, 2014 ENRON COMPANY FRAUD Based on the findings from milestone one, it is clear that Enron Company experienced an accounting fraud resulting in a spectacular bankruptcy. This was brought about by the accounting fraud made by the accounting firm. An accountant may face accounting dilemma of reporting any accounting violation to the financial accounting body of a company. It is an ethical duty for an accountant to report any such violations but also the dilemma arises on whether to report any uncertain mistake in the accounts. In the case of Enron Company the mistake was done by the accounting firm and the involved CEO was Jeff Skilling. According to legal and ethical issues of accounting fraud, government review of company financial records caused by an accounting scandal could cause the company’s rapid decline and can also lead to the layoff of thousands of employees and we can see from the Enron Company that it dropped its shares from $90 to $0.50 which brought loss to employees and a big financial loss to the investors who had saved their money in the Enron Company. From the legal ethical issues, executives and other corporate officers can also face criminal prosecution, leading to heavy fines and prison time as seen from the case where the scandal resulted in penalty of CEO Jeff Skilling. Jeff Skilling was sent to prison for 24 years for engaging in accounting fraud for the financial collapse of the company. Arthur was not charged...
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...Week 1 Trevor Castleman Bethel University MOD450 Prof. Huss 1/22/15 Enron 1) It is in no way possible to reconcile Kenneth Lay’s statements in regards to Enron’s values and visions with the actual practices of Enron. Executive from the company used the company profits as personal funds. (p.11) It is impossible for Lay to truly believe that the company was in ethical operation as he was aware that Enron was using monumental amounts of credit to keep the company looking profitable.(P.11) Lay should have withheld legal operation and not allowed the company to be used as a person asset by corporate executives. 2) The way bonus’ are structured speak in great volume about a company when set up unethically. The way Enron’s bonus’ were structured so that employees were more concerned with the stock price than the state of the business. To the point that a dropping stock price was so unacceptable that employees were willing to lie, cheat, and steal to keep it on the rise. This meant defrauding investors and eventually collapsing a once profitable and respectable company. This system of a bonus is very corrupting. 3) Technical compliance with the law and ethical obligation are two completely different topics. When looking at the law it never seems to fail that there is some sort of loop hole. It is possible to completely comply with the law yet mislead and lose complete trust of stockholders due to failing to act ethically.(P.11-12) It is not only unacceptable...
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...experienced astronomical growth behind the leadership of its CEO, Ken Lay, and executives Jeff Skilling and Andy Fastow. However, this growth did not come from hard work alone, as the film details some of the underhanded tactics used by Enron to become one of the largest companies in America. Lay, Skilling, and Fastow created an environment where all that mattered was the bottom line, meaning that anything was in the realm of possibility (no matter how despicable) as long as it brought hefty returns for the company. There were many lessons to be learned from Enron. First off, we learn a great deal about the psyche, and how certain primal urges can cause us humans to do things that would at first glance seem appalling. Also, the importance of company culture and corporate ethics is revealed throughout this film. There was a great deal of negative energy permeating throughout Enron that made it nearly impossible for them to sustain their upward trajectory. By no means should Enron’s leadership be let off the hook for what they did, but it is important to understand what motivated them to act in such a way. Early in the film, we get a little background information on the company’s leaders. Lay grew up in poverty and learned the value of hard work early on, as he watched his father work many jobs. He would always think about a better life, and how he could use business as a way to attain wealth. The fact that Lay could not enjoy the finer things as a child led him to always push forward...
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