ENRON In 2000 Enron was the world’s leading corporation in selling natural gas with an estimated worth in sales of around one hundred billion dollars and the company showed only signs of progressing. Within one year the company went completely bankrupt and forty of their top employees were arrested or are in jail awaiting trials. How can a multinational corporation with steadily increasing revenue take such a drastic fall into bankruptcy and how did no one see this coming? In the end Enron knew exactly what was in their future and hid it from the public by allocating their debt and with a loophole in their accounting, it turned out to be one of the biggest cover ups in the stock markets history.
Enron started about 18 years ago in July of 1985. Huston Natural Gas merged with InterNorth, a natural gas company. After their merge they decided to come up with a new name, Enron. Enron grew in that 18-year span to be one of America's largest companies. A man named Kenneth Lay who was an energy economist became the CEO of Enron. He was an optimistic man and was very eager to do things a new way. He built Enron into an enormous corporation and in just 9 years Enron became the largest marketer of electricity in the United States. Just 6 years after that, in the summer of 2000 the stock was at a tremendous all time high and sold for more than 80 dollars a share. Enron was doing great and everything you could see was perfect, but that was the problem, it was what you couldn't see that was about to get Enron to the record books.
Case Study Born from the merger of companies Houston Natural Gas and InterNorth, Enron became one of the top leaders in the natural gas industry. After the deregulation of natural gas pipeline regulations by the US Government, Enron had to develop a new business strategy. The CEO, Kenneth Lay hired a consulting firm in order to help Enron develop a new business strategy that complies with the new government regulations. The management company, McKinsey & Co., assigned one of their younger consultants, Jeffrey Skilling, to their new client, Enron’s, consulting account. Impressed by the work that Jeffrey Skilling was doing on Enron’s new business strategy, Kenneth Lay decided to create a new division of his company named Enron Finance Corporation.
The Enron scandal, considered one of the most notorious accounts of fraud and company bankruptcy in the history of the United States, was one of a small handful of rare business and stock controversies that caused drastic changes in law, marketing, and business systems within America. The executives and shareholders of the company lost millions of dollars in debt, while employees of the company were denied pension benefits, a necessity for future retirement plans. (“The Enron Collapse: A Look Back”)
Jamie Dimon once said that “doing first class business in a first class way” has led to all of his success at J.P. Morgan because building a business does not only mean to build on profits, but also to make sure business is being done in an ethical way. Enron Corporation, once a great accounting firm, fell under its own weight as it was reaching for greatness. Former CEO Kenneth Lay, made a commitment to business ethics based on communication, integrity, respect, and excellence. However, a once successful American energy, commodities, and financial risk service company made questionable financial practices that ultimately led to their downfall. This essay will focus in the details of ENRON Scandal, how the corporate culture influenced the employees, enactment of the Sarbanes Oxley Act of 2002, the impact Enron has made to the current markets, and ultimately leading to the question whether another Enron scandal can occur again in the future.
The Players Kenneth Lay – Lay was the Enron founder and later known as the dishonorable Enron business executive who was ultimately convicted of conspiracy and fraud. Lay was born in Missouri in 1942. He was very smart; he got his bachelors, masters and Ph.D. in economics. He started his carrier as economist and speech writer, then lecturer and assistant professor, but latter he got to be an energy deputy under-secretary for the United States Department of Interior. He also got to be the Florida Gas Company vice-president and then president, and other high standing positions with The Continental Group, Transco Energy Company, Houston Natural Gas Corporation, and of course Enron’s chairman, CEO, and president.
Enron Scandal Extra Credit Enron Corporation was a company founded in 1985 when InnerNorth and Houston Natural Gas Company merged. Enron marketed natural gas, electricity and broadband. According to “Enron: The Smartest Guys in the Room”, Enron was once on Forbes where they were named “America’s Most Innovative Company,” for six consecutive years. Enron was a company that kept growing but no one wonder how. At one point their stock was worth $90.75, but they filed for bankruptcy which caused the stock to drop to $0.67.
A documentary film released in 2005 called the Smartest Guys in the Room reveals the shocking collapse of Enron. The Smartest Guys, Kenneth Lay, Jeff Skilling, Andrew Fastow, Lou Pai, Clifford Baxtor, and Arthur Anderson, were all involved with America’s ultimate Corporation Scandal. But who do we blame? Enron had over 20,000 employees and was founded by Kenneth Lay, CEO of Enron, in 1985. Lay wanted to push his views of deregulation which pushed him to start the company (SGR). The first event that happened leading up to the downfall was the president, Mr. Borget, and his traders manipulating the company’s earnings and exporting the profits to their personal account. When Lay made the decision to not fire them, it definitely raised the
In the early 2000’s the economy was doing well and the stock market was also doing well. A company by the name of Enron was an up and coming company in Houston Texas. As explained in the article “the real scandal” Enron was created in 1985 by Kenneth Lay after combining companies Houston Natural Gas and InterNorth. Other executives provided false information and led Enron’s board of directors on fraudulent and high risk accounting practices (Enron, 2002). Because of this scandal and others like it the government and it agencies were forced to do an investigation concerning the unethical behavior and the amount of false information that was provided to make investors believe the company was more profitable then it currently was at that time.
The Enron Disgrace: Abstract: Ray Bowen, a Citigroup banker at the time and now Enron's chief financial officer, once asked Mr. [Andrew Fastow] about a batch of complex equations that filled a whiteboard in the conference room next to the Mr. Fastow's office. "You can't tell me you understand those equations," Mr. Bowen commented to Mr. Fastow. Mr. Fastow replied: "I pulled them out of a book to intimidate people." The Fastows headed to Mrs. Fastow's native Houston in 1990, both taking jobs at a young company called Enron.