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Ldr 531 Downfall of Enron

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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 point to which caused the failure of the over-all company. Book states “centralization refers to the degree to which decision making is concentrated at a single point in the organization” (pg 493). With this point management, usually the very top can make the decisions for the company and not include the other entire stakeholder. In an article written by three different professors for

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