Tiffany Sue Eubanks
January 23, 2012
Enron was introduced in 1985 with merging Houston Natural gas and InterNorth. The company consisted of selling natural gas pipelines in the United States. They soon became the largest natural gas seller in the North American region by 1992.(Berenson, A & Oppel, R. Jr.) Enron continued to help their company to grow by trade of natural gas across the globe. Because of the rapid grow and size of the company the numbers of the company became poorly reported. The financial advisors of Enron hide billions in debt from the chief financial officers and other directors. They hide the issues of failed deals and projects from the Enron board.(Barringer, Felicity) Shareholders lost 11 billion and stoke holder share when from $90 a share to $1 in a year??™s span. Many issues could have been resolved if the management of Enron was different.
One way that managers contributed to the fall of Enron was by the reckless use of derivatives and special purpose entitles. Because of the lack of research established on these entitles, the financial committee was unorganized on the accounts and the direction to take. The improper usage of the entitles and the way the employees practiced the accounts made the committee unorganized. Also a failure that effected the company was the way they showed favoritism to the auditor. He was not only the auditor but the consultant for company. This caused a conflict of interest and was questioned saying is a reckless standard for the organization.(Barringer, Felicity) The auditor was being too pressured by the company and to be a consultant also brought issues to the table. Enron then begin placing the company into a snowball effect. This consisted of them booking the cost of cancelled projects as assets to the corporation. Nothing was officiated as being canceled either so the company when from 90 million under to 200 million under in a matter of a couple years. (Barringer, Felicity) The finally, when the corporation encountered analyst the managers would move employees from departments to fill in areas of interest to create the appearance of growth. This helped the company??™s stock to increase. This reckless behavior on behalf of the management of Enron caused the fall of the company.
Issues could have been avoided if handles differently to the company of Enron. A few suggestions that could have helped the company turn their organization around is first, code of conduct. This code should be enforced to all employees and especially the upper management. A code of conduct is a code that needs to be taken serious because this is how you get outsiders to respect you. The code needs to be introduced and posted throughout the business. The mission is what all employees base their work ethics off of and strive to maintain that same vision every day. There should also be a no tolerance level when the conduct is violated because this show employees the seriousness of the code. Another suggestion would to separate a company??™s auditor and consultant. Having a single individual for these positions shows appearance of conflict. This is the major issue Enron ran into and because of that they were questioned.(Berenson, A & Oppel, R. Jr.) Then finally, communicating to all levels of management and also keeping the lines open is valuable. Enron did not communicate to the lower departments and because they didn??™t the departments could not succeed. Communication with your employees allows everyone to be on the same page. You them become aware of the weaknesses that need to be addressed. This allows all employees to know where they stand in the company.
An organizational study with Enron could have given an insight to the workers and helped the outcome of the corporation. The study could have evaluated their point of view and standards. The company could have seen that there was no ethical conduct being enforced to all the employees. No structure to a mission the company starts to slide and this is what happened to Enron. Also the study could have seen their analysis was fake on the fact that did not acknowledge the truth of failure in the company. When not admitting the obvious to those like stockholders you allow everyone to fall with you.(Barringer, Felicity) Not acknowledging the truth of the company causes downfall. And lastly, Enron never tried to improve their decision making process. They only wanted to save their loss within the company. When you have managers not caring about their employees there become tension. The study could have made the managers aware of the situation and could have changed the ethical view of the managers/leaders.
Enron has suffered many faults and because of these faults it caused them to fill bankruptcy. If looking outside the spectrum and undergoing serious reconstruction the company could have changed. But continuing to manage a company without changing the plan, how could they expect things to dramatically change First main issue the company encountered was greed and a lack of ethical conduct within the company. That sad that company could resort to those allegations but in today??™s society it happens every day.
Barringer, Felicity. (January 28, 2002). 10 months questions on enron came and went with little notice. Retrieved on January 22, 2012 from www.nytimes.com
Berenson, A & Oppel, R. Jr. (October 28, 2001). Once-mighty enron strains under scrutiny. Retrieved on January 22, 2012 from www.nytimes.com
Berenson, Alex. (September 09, 2001). Market watch; A slef-inflicted wound. Retrieved on January 22, 2012 from www.nytimes.com