Enron And The Fall Of The Company
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Enron and the fall of the company
Enron was a company that was known by many people and corporation not only in the United States but also around the world. It grew to be one of the largest companies, so as imaged a lot of people were affected by the fall of the company. Over 210000 employees lost there jobs without even knowing what was coming to them and what was going on behind the doors by the people who were running the company. Apart from losing their job, their form of income for their families, they also lost any money that they had invested in shares of the company and their pension funds, because the company encouraged their employees to invest their money in its own shares and also closer to the end they wanted their employees to invest even more money.
Good business decisions are based in financial statements that are prepared by the accounting firms or accountants within a company. When doing account for any company they all follow a standard called GAAP (Generally accepted accounting principles), GAAP provides guidelines and rules which companies use when preparing their financials statements so that all company are on the same page as one another. When Arthur Anderson accounting were preparing the financial statements for Enron they were lying about the financial situation that the company was in, in order to make the company look financial better than they really were. Nobody can really put reasoning behind why they done this but everyone can make assumptions on what was occurring and who was involved and why it all occurred. After Anderson accounting was involved with the fraudulent scandal of Enron and also WorldCom they got themselves a bad name and with a bad reputation hence no other companys would want to do business with them. Those companies that were currently doing business with them would not want to be affiliated with them. When the company had their audit done, they actually would have not been in such deep water as they got themselves into if they hadnt tried to hide things and destroy their papers, because they actually only had 4 major areas where they could have been caught.
The first person from Enron who was given a sentencing was the former treasure of the company, Bill Gilsan. Gilsan pleaded guilty to being part of the fraudulent activities that were occurring with Enron. Whereas the former CEO Kenneth Lay pleaded not guilty during his trail, he was being charged on 11 different counts including false and misleading statements to employees and to the bank along with different forms of fraud (2004, 9). To back up his plead of not guilty he said he was not aware of what was occurring with the financial statements, if this was true then someone should be trying to find out why he didnt know. As the CEO of the company he should have known what was occurring and why, it is evident that he was aware if what was occurring when he made over Ðˆ300 million when selling his shares of the company. While the company was encouraging their employees to invest more into the companies stocks he was selling his to make an overall profit of over $200 million, along with his salary and his bonus he also made a very large sum of money.
Every company is built on ideas of basic objectives and how those objectives should be reach. Companies with a good culture enable their employees to fulfill their needs, which hand in hand will lead to better moral, motivation and most important productivity. People have a need for feeling safe in their job and want to be able to trust the people they work with. They want clearly defined responsibilities and boundaries, which will allow them to get their work done faster without any interruption. They need to be well informed about company matters and have a good communication relationship with their managers. And they want to be involved in decision which will affect them and their work. All of these and more are key values in running a company productively. If the company culture is impure, then employees will not believe in their work.
Enron is a good example of a company gone off its tracks. Enron grew significantly fast over the years and obviously it affected its managers. Their focus was on aggressive growth and they did so through risk taking. They started getting greedy and lacked corporate integrity. Their main goal was to maximize price per share of common stock, and they didnt care in which way it was done. They deceived investors with creative accounting and misleading profit reports. This was a matter of routine in the final months of the company. They hired Arthur Anderson, an accounting firm, as a consultant – which also handled their audits. This is a clear conflict of interest for Anderson which knew Enrons secrets, but didnt report them because of the fear of losing the lucrative consulting job.
There where a matter of ways Enron increased its price per share of common stock. They made up phony companies which they merged with in order to hide debt. This was organized by Maslow, who even went so far as to naming some companies the initials of close family members. Enron was also handling the pension plans for its employees. They used the funds in such ways that advantaged the company even when they may disadvantage employees. They even encouraged their employees to buy the stock in the company, knowing it was a bad investment.
What started to happen within the company was that the employees were getting less and less information about company matters. Employees started to feeling like outcasts within the company and felt vulnerable. Even though employees did a good job and were true to the company, they were not rewarded for their integrity with promotions. Leaders of the company cared more about self-enrichment, rather than the needs of employees. They knew the company would eventually go down, but tried to keep it afloat by misinforming employees and keeping decision making to the relatively few that knew about its secrets. They didnt want to ruin their reputation by letting information get out.
The leaders of the company were obviously not working ethically. Even though the company had a code of ethics, they didnt follow it. There isnt any legal obligation to do so, so they set it aside as they wanted. The leaders had little regard for ethics and law. This affected the employees who saw the leaders acting unethically, and believed that the only way to progress within the company would be by doing so also. There probably were a few people who found out about the secrets of Enron, but either did not report them, were silenced or paid off. But the ground had been laid. Enron had dug it self in a hole and had no way of getting out.
A company like Enron should have a strong set of code of conducts,