They offered a variety of services that were not limited to natural gas but also included electricity, communications, and many energy related services. Together, CEO Jeffrey Killing, Chairman Ken Lay, and SCOFF Andrew Fast were able to bring transformation to Enron. They created a multi-billion dollar Wall Street celebrity out of an electricity and gas company. There was an unusual growth spurt in
Enron’s profit of about $69 billion from 1998 to 2000. This caught the attention of an anonymous bankruptcy examiner and it was suggested that Enron’s net income and cash flow had been compromised. The Wall Street celebrity corporation was caught lying and in debt. They lied about their income and cash flow in extravagant ways in order to maximize the corporations’ value, leaving stakeholders empty-handed. Enron had an innocent beginning that was fueled with a culture that required employees to have the mindset of individuals competing against each other instead of working together to see Enron rise and succeed as a whole.
Enron: Corporate culture’s contribution to bankruptcy A Couture established by Enron led many to compromise what they believed in to be moral. Selfishness, pride, defeat, and arrogance may all be used to characterize what led to such deceit on Wall Street. However, many employees did not begin their jobs at Enron with that frame of mind. A culture of competition amongst employees was highly praised and it bred lying, stealing, cheating, and compromise in even the most noteworthy citizens. The culture in place somewhat modeled the theory of the survival of the fittest in which only the strongest and most able to adapt to change would survive.
Similarly, only the best employees would survive working at Enron and the weakest would be kicked off. There was so much fear instilled in employees that even when things were going wrong and the need to deliver bad news was the only possibility, employees would just “fix” and cover up whatever the bad news was. This only increased the habits that employees had of lying in order to survive. Major managers at Enron were also largely responsible for the demise of the good intentions and expectations that Ken Lay had for his employees.
He himself became entangled in the lying and stealing, and cheating that was taking place instead of the expectation of a corporation filled with integrity, ethics, and morality. The value of shareholders sank in the eyes of officers and their greed grew. As a result, Enron employees got creative with what they considered to be assets and began to give the appearance of gaining profit while actually losing assets. Contributors to Enron’s Demise: Bankers, auditors, and attorneys Those with close ties to Enron in the areas of banking, auditing, and law also had much to do with its’ demise.
A banking firm by the name of Merrill Lynch has been accused of assisting Enron in their endeavors to cover up their financial ports. Merrill Lynch was said to have bought millions in Nigerian barges sold by Enron, which also happened to be greatly financed by Enron. Because of Enron’s investment in Merrill Lynch, there was great fear of losing “ins” on stocks based on Merrill Lunch’s behalf. Another one of the major mistakes that were made was that Enron’s auditor was filled with conflict of interest. Because of their business partnership with Enron, Arthur Andersen ALP had obvious conflict of interest.
Enron was not thoroughly questioned by Andersen despite expressed concerns from Enron’s former vice president of corporate development, Sharron Watkins (Farrell, Frederica, Farrell, 2015). Andersen could not have blamed their role in Enron’s scandal on ignorance because it was their job to be thorough and subjective in the manner in which they audited Enron. However, differing thoughts were exposed when it was suggested that Enron swindled Andersen and that Andersen could possible be found innocent due to the complexity of Enron’s financial accounts (Kelly & Early, 2009).
However, that argument could not be maintained due to the destruction of documents that were pertinent to Enron’s case. Vinson & Alkies had Enron as one of their top business partners hat made up a significant amount of their revenue. Attorneys had a major role in giving Enron permission to continue in their creative accounting ways that ultimately led to their downfall. A common defense and position that top managers took while in question was that they felt like what they were doing was not wrong because attorneys had told them that what they were doing was permissible.
When Sharron Watkins brought this to attention, she was in danger of being let go. Watkins expresses that both Enron and Vinson & Alkies were aware of their violations of securities law principles in stating that, “One f the reasons given by Enron’s counsel for not firing me was that if I sued for wrongful dismissal, in the discovery process the nature of the transactions with Andy Fast, the SCOFF, might become public, which would damage the company” (Been, Pinto & Watkins, 2009). Enron had Vinson and Oilskin’s legal backing and thus granted permission for much of their illegal moves.
Andrew Fast, Enron SCOFF: The role he played in Enron’s downfall Andrew Fast was Enron’s chief financial officer that was known for being an infamous risk manager in the sass’s. Fast put together off-balance-sheets to pep debt out of being shown on Enron’s balance sheets by applying special purpose entities (Bose, Gardner, Smith, 2006). Fast gave in to the pressure of lying in order to maintain his reputable position, as Enron’s corporate culture demanded it. Special purpose entities set in place by Fast hid $1. Billion in debt by completely omitting it and they also made a way for Enron’s net income and cash flow seem more profitable than it actually was (Newman, 2007). The accusations against Fast consisted of more than misconstruing balance sheets to give Enron the reputation of a successful corporation, but it also included seasons of greed. There was money that Fast made by taking advantage of partnerships. Many have blamed Fast for Enron’s downfall but his initial struggle to stay afloat as an Enron employee should be taken into consideration before blaming him for the entirety of Enron’s demise.
Conclusion Enron began as a company of innovation within it’s field of supplying energy and it ended as an innovative company that specialized in innovative ways to hide their debt and keep stock prices high. A change in corporate culture that placed integrity and shareholders before profit and wealth could have kept Enron on Wall Street. An auditor without conflict of interest would have also been beneficial from the beginning. With the wealth of knowledge that Enron acquired through their human capital, they could have sought an alternative, yet still innovative solution to their decreasing stock value.
There were possibly more top managers and other firms involved in the Enron scandal, however, for the fear of being sent to trial themselves, they refused to testify. This reduced the ability for a fair trial for those major indicted and this should also be taken into consideration when observing the faults of Lay, Killing, and Fast. Enron’s wealth and debt took time, what happened in between that time reveals the process of humanity tasting wealth and it eventually leading to greed with the ability to destroy reputation, credibility, and everyone involved.