Enron

Case Analysis of Enron

How can a corporation which was part of Fortune 500 's magic circle of ten plummet to bankruptcy in just a span of months ? Enron was a highly-esteemed business entity . In 1999 to 2001 , Enron handled more than 1 trillion in transactions , and in 2000 it reported sales of over 100 billion (Everest Innes , 2001 , para . 1 . Even when it was already sizzling with news about its bankruptcy , Enron still managed to take the number 5 slot in Fortune 500 's 2001 list . Supported by documents that showed its

stability in the market , shareholders and the rest of the world were dumbfounded by its speedy collapse and the bundle of intricate financial misconceptions that fell with it

Facts

In 1985 , two big companies , Houston Natural Gas and Internorth successfully merged and resulted to the birth of Enron Corporation . In a span of fifteen years , Enron became the sixth largest energy company in the world ' with Kenneth Lay as chairman and Chief Executive Officer (Ferrel , Fraedrich Ferrel , year ,

. 319 . Lay stepped down and paved the way for Jeffrey Skilling to sit down as CEO even when he remained as chairman in early 2001 . However , six months after , Skilling suddenly resigns in the midst of all the issues regarding bankruptcy , making Lay sit as CEO again . By October 2001 , financial reports prove that Enron indeed is burdened with great debt amounting to 1 billion . Just two months after the initial bad reports , Enron 's employees lost their jobs as the firm d for Chapter 11 bankruptcy . Lay steps down as CEO by early 2002 as investigations on who was responsible for the collapse began

Some of the factors that seem to have led to the disaster are Enron 's corporate culture , masked financial problems and corporate heads who were proven guilty of creating such a great but misleading financial image

Enron was known for hiring the best employees in their field . Claiming to be the The World 's Leading Company ' many employees were blinded by the arrogant culture that was set . Executives were given stock options as an incentive to ensure their quality performance . This encouraged a lot of risk taking on the part of these managers to stay on top . To keep up with its promise of having only the best labor within their fold , the company , through Skilling 's scheme , developed a policy wherein all employees were subjected to an evaluation of their performance every six months . Those who ranked on the lower twenty percent in this appraisal were automatically listed as candidates for the firing line . This made everyone within the company use whatever was necessary to keep their jobs - even if it meant lying and taking risks The rivalry amongst its ranks was stiff and employees became bent on competing against each other instead of performing against others in the industry . Nobody wanted to suggest there were problems that the corporation could not handle because they might get laid off . Due to its...