Enron Corporation (former NYSE ticker symbol ENE) Essay
The fall of Enron is blamed for its lack of strong corporate governance. The initial tremendous growth of the organization was prompted by ambitions for short-term economic advantage while overlooking the long-term sustainability of its business expansion. Enron should have been structured with a culture of transparency and accountability in its management to promote mitigation of the unethical practices which led to its downfall (Fox, 2003). A good corporate culture should encourage reliable linking of information (financial and governance) between investors and company management.
On the other hand, acquisition and expansion of investment brings with it management complexity challenges (Powers, et al, 2002). This calls for the establishment of an efficient communication and network system for enhancing effective monitoring of the various subdivisions from a centralized point. Still, close evaluation and strategic analysis of the viability of a business venture should be given priority in making acquisition decisions. This structure of corporate governance could have significantly helped in mitigating the unethical business practices that led to the downfall of Enron.
Whether Enron’s officers acted within the scope of their authority The downfall of Enron was a chain of numerous ethical and legal failures by its officers. Their act of engaging in compromising
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Based on this reasoning, the officers of Enron engaged in unethical practices to protect the breakdown of the corporation (Benston, et al, 2003). However, the purpose of the auditing firms is to identify, prevent, and report incidences of illegal financial transactions to the authorities. The officers have not authority to contradict the recommendations of the auditing firm. Moreover, Enron officers’ authority is limited by the law to protect the interests of the investors, thus they acted outside the scope of their authority (Kurdina, 2005). The corporate culture at Enron
Enron Corporation had a corporate of unethical short-term economic expansionism whose decisions were limited to its executive arm. According to available information, the company had a nontransparent financial statement policy, which was aimed at hiding it actual operations and financial positions from its shareholders and economic analysts (Santa Clara University, 2010). In a move to realize its business interests, Enron engaged in establishing a complex corporate governance culture that complicated the process of easily detecting its unethical business practices.
Indeed, this corporate culture engaged in corrupting information to be presented to the company’s board of directors (Fox, 2003). This was further complicated with its move to pursue a diversification strategy in 2000, a move which made gain international business advantage. This was instrumental in promoting Enron’s corporate policies of establishing a network of intermediaries. In addition, the corporate culture in strived to bar the employees from getting informed of the actual functioning of the organization (Santa Clara University, 2010).
This compromised accountability and transparency in the corporation. Therefore, Enron had strong negative corporate culture as such never increased accountability in the operations of the corporation. Two alleged irregularities in the actions between sellers of securities and Enron One of the alleged irregularities between sellers of securities and Enron was the massive benefits gained by Enron through stock options. According to the law entering into the stock option plans requires a closely scrutiny of the actual worthy of the organization by the SEC.
such should entail auditing practices rather than just provision of the financial statements of the corporation (Joint Committee on Taxation, 2003). This was however not the case for Enron. It has been alleged that Enron had 96 million shares in the stock option plans by the end of 2000. Following a rise in its share price in 2001 to $83. 13, the company filed for compensation. The other irregularity is that Enron engaged in illegal insider trading practices. True to the letter, of the executive members of Enron, Lay owned $659 million and Skilling $174 million of the director’s stock ownership (Joint Committee on Taxation, 2003).
Just to be appreciated is the fact that Skilling has been established as the driving force to the unethical practices of Enron and Lay was the chairman of the corporation, an element indicative of illegal insider trading practices. Whether or not Enron was liable for the actions of its agents and employees The function of a corporation as a business entity is to promote transparency and accountability among its employees and agent. This is sort by the corporations to protect its reputation in the public. However, this was not the case in Enron.
The corporation lack ethical corporate culture for guiding the behaviors of its employees and agents. This can be evident from the move by Skilling to ask “What earnings do you need to keep our stock price up? ” during budget meeting and such could be implemented regardless of its feasibility (Human Rights Watch, 1999). Therefore, Enron was liable for the actions of its agents and employees.
Benston, G. , et al. (2003). Following the Money: The Enron Failure and the State of Corporate Disclosure. Retrieved August 15, 2010, from http://reg-markets.org/admin/authorpdfs/redirect-safely. php? fname=.. /pdffiles/phpD9. pdf
Fox, L (2003). Enron: The Rise and Fall. Hoboken: John Wiley & Sons, Inc. Human rights Watch. (1999). The Enron Corporation: Corporate Complicity in Human Rights Violations. New York: Human Rights Watch.
Joint Committee on Taxation. (2003). Report of Investigation of Enron Corporation and Related Entities Regarding Federal Tax and Compensation Issues, and Policy Recommendations. Retrieved August 15, 2010, from http://www. gpo. gov/congress/joint/jcs-3-03/vol1/index.html
Kurdina, A. (2005). The Collapse of Enron: Managerial Aspects. Retrieved August 15, 2010, from http://ezinearticles. com/? The-Collapse-of-Enron:-Managerial-Aspects&id=59932
Powers, W. , et al. (2002). Enron Special Investigation Report. Retrieved August 15, 2010, from news. findlaw. com/wp/docs/enron/specinv020102rpt1. pdf Santa Clara University. (2010). What Really Went Wrong With Enron? A Culture of Evil? Retrieved August 15, 2010, from http://www. scu. edu/ethics/publications/ethicalperspectives/enronpanel. html