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Business Failure Paper – Enron
Business Failure Paper – Enron
In 1984 Houston Natural Gas bought the Florida Pipeline Company, in 1985 it merged with InterNorth Incorporated and six months later became the infamous ENRON. When these two companies merged ENRON owned nearly 40,000 miles of pipeline (Manlove, 2010).
Enron was a successful company or though the public thought. Enron fell to bankruptcy simply because none of the stakeholders knew what was best for the company. Greed is a cruel trait and greed was the negative in Enron’s organizational behavior.
In the 1980’s Washington was being lobbied by the energy corporations to deregulate and let the energy companies set their own price. The theory was that the monopoly in the energy field would be eliminated and be better for the consumers. Washington over the next few years did lift some controls on who could produce energy and how it would be sold.
During this time Enron sold natural gas on the open market that in turn made Enron one the seventh largest company in the United States employing more than 25,000 employees globally (Manlove, 2010).
Enron was growing and the executive became sloppy and very greedy. Enron counted on the sale of the company’s stock. The scandal, “however”, was the stock was not as valuable as the executives expected. Enron’s executive’s goal was to increase the wealth of themselves and the shareholders. To increase the value of Enron’s stock the executive team relied on new capital assets and hid the possible risks to the stakeholders. Enron’s executive team continued this method that eventually became the end to one of the most successful organizations in the United States (Gudinkunst, 2002).
The executive team of Enron at this time should have questioned the accounting auditors and found out the true status of Enron’s finances. Enron was constantly rising and the executive team chose to ignore the signs of present and future problems. The leadership of Enron became relaxed and accepted the information given to them by auditors without questioning any of the information.
Enron employees suffered at the hand of the executive team. The leadership and management of Enron employed over 100 accounting and legal staff who should have questioned the methods used in covering the capital investments. The problem quiet simply is that everyone was making money and no one questioned how or why. The leadership and management team supported the accounting and legal staff of Enron. Employee incentives and salaries were high to help hide Enron’s debt and boost reported profits. Employees remained supported to Enron and did not want to “rock the boat” (Manlove, 2010).
The Sarbanes-Oxley Act (SOA) has made conduct of corporations federal law. Enron tried unsuccessfully to keep the trouble within its corporation but once the discrepancies started to go public there was no stopping the downfall of Enron. SOA cannot stop organizations discretions it generally will deter fraudulent acts. Under SOA Enron had to certify that all information given to the stakeholders was correct. The executive team of Enron tried to hide the true financial picture of Enron but when the federal government stepped in the executive team knew the reality of the crisis. Enron was a sinking ship. The executive’s made millions and cost employees, shareholders, and the public millions of dollars because of the lack of internal control by the executives of Enron.
Eventually Enron’s downfall became public knowledge. The mission and vision statements of Enron were false along with any code of ethics that may have been in place. The executives hid the true financial picture in order for Enron’s executive team to continue making the high salary and living the millionaire lifestyle. Thousands of people lost their retirements and livelihood because of corporate negligence. There was neither solid, concise management nor leadership in Enron. The leadership that was there was negligent and falsified information that led to the failure of a once successful business globally.

Reference:
Manlove, D. (2010). A History of Enron. EzineArticles. Retrieved from http://ezinearticles.com/?A-History-of-Enron&id=2082701
Gudinkunst, A. (2002). Enron- A study of failures, who, how, and why? The Faculty Network. Retrieved October 4, 2010 from http://web.bryant.edu/~facdev/Web%20Sites/newsletter/fall02/agudikunst.htm

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