THE BEGINNINGS OF ENRONEnron has it’s beginnings in the natural gas.Enron was a part of the Northern Natural Gas Company in Omaha, Nebraska.Enron was formed in 1985 after the merger of Houston Natural Gas and Omaha’s InterNorth companies. It was an interstate pipeline company.
ENRON’S CHANGESEnron lost a lot of profit during the merger and need a way to make money.Enron began expanding the company into the trading of natural gas.Enron Online was launched for the purpose of trading natural gas online.Enron also launched a broadband.
ENRON CHANGES CONTINUED…Enron also invested in a numerous investments that proved to be non profitable.Enron began using Special Purpose Enterprise (SPE’s) to cover up investments and deals gone bad.SPE’s are allowed to be omitted from financial reports as long as a private party owns them.Enron leaders used accounting fraud and tricks to deceive shareholders and employees.
ENRON CHANGES CONTINUED…In 2001 Enron’s deception began appearing.Enron’s stock value dropped to almost worthless.Enron filed for bankruptcy December 2001 and about 5,000 Enron employees lost their jobs.
ENRON’S CULTUREEnron’s culture was one of dishonesty, lack of communication, and fraud.CEO Kenneth Lay started the organization off on a lie when promising not to move the headquarters after the merger. (He moved the headquarters from Omaha to Houston)Enron’s Code of Ethics and culture reflect two different attitudes.
ENRON’S CULTURE CONTINUED…The Code of Ethic reflects honesty, integrity, and commitment.Enron lied to employees telling them to continue to invest in the company and ensuring them Enron was in perfect financial health.
ENRON’S REASONS FOR DECEITGreed…Kenneth Lay, Andrew Fastow, Jeffery Skilling, and accountant Arthur Andersen created SPE’s and committed accounting fraud to keep making money off of Enron.Lay wanted to keep the image as the leader of the “New Economy”. Failure was not an option for him. So this drove him to dishonesty.
ENRON’S AFTERMATHLay, Skillings, and Andersen all faced trials for their crimes.New laws were created to prevent another Enron from happening and to protect shareholders and employees of corporations- Sarbanes-Oxley Act was created
SARBANES-OXLEY ACTPurpose:To restore faith and confidence in the financial marketTo add requirements and standards during the auditing processProtection for employees and shareholders
Enron was well on it’s way to becoming a greatinnovative company. It had the drive and theinnovative spirit to create ideas and change withthe times. The problem Enron had was not beingable to learn from their mistakes and take the timeto think of ways to fix or improve the company.Enron was in a hurry to do everything andbecome the leader of the “new economy”. It letspeed and not taking the time to fix mistakes killthe company.
REFERENCESEllis, John. (2002). Life After Enron’s Death. Fast Company, Issue 56. Business Source Complete Database.Jickling, Mark, (2003). Accounting Reform After Enron: Issues in the 108th CongressCRS Report for Congress.Chandra, G. (2012, September 23). The Enron Implosion and Its Lessons. Retrieved From http://web.ebscohost.comAblander, M. (2012, September 23). How Could it Happen? Enron and the Architecture of Wrong doing.Retrieved From http://web.ebscohost.com