Essay Preview: Enron
Report this essay
The Enron scandal is the most noteworthy corporate collapse in the United States since the breakdown of many savings and loan banks during the 1980s. Enron was the seventh leading the company in the United States prior to its demise. When Enron filed for bankruptcy on 2 December, thousands of employees lost their jobs and billions of dollars when the company prevented them from selling shares from retirement accounts as they plunged in value, while at the same time, draining the investment savings of investors across the country who put their retirement and other investments into pension funds, mutual funds, and other areas that invested in Enron. There were many repercussions caused by the collapse of Enron, too many to include in this essay, but the one factor is, what actually caused the Enron collapse? What are the reasons behind this corporate giant hitting the ground so hard so fast? In this essay I will give my opinion as to what I feel we some of the circumstances that potentially caused the collapse of Enron.
The first lethal blow that I perceive caused the Enron demise was the collapse in the price of energy and the sudden end of the California energy crisis, which exhausted cash and ruined Enrons credit. Enron was mainly a trading company, a commerce that depended on good credit and customer confidence. The energy industry is brutal. It is willing to risk disastrous global warming to protect income. If ever a conglomerate has held influence over national energy supplies and guidelines, and was in a position to dictate policy for its own advantage, it was Enron. Yet, when conditions changed, Enrons power disintegrated.
Secondly, I see the dual roles played by Andrew Fastow as conflict of interest. Andrew Fastow, who at the time drew millions in income from dual roles as Enrons chief financial officer and as the head of several partnerships that did business with the company, “Analysts have attributed the companys success largely to Fastow,” the magazine gushed. “Much of its growth has been fueled by the unique financing techniques pioneered by Fastow.” Those unique financing techniques turned out to be the prime cause of Enrons implosion (Houston Chronicle, 2 October 2002). Exactly what defines conflict of interest: A conflict between the private interest and the official responsibilities of a person in a position of trust. Andrew