Enron: the smartest guys in the room Essay

Enron Corporation was an energy, commodities, and service connection come forward of Houston, Texas founded by Kenneth jell in 1985. Lay built natural gasolene power energy in tocopherol Texas which helped Enrons tune rise. Louis Bor shoot for, Andrew Fastow, and Jeffery Skilling were the top solicitude executives from 1985 until 2001. Each helped to drive intimately the dying of the go with in multiple ways. mavin of the first scandals in Enron involved prexy Louis Borget and deuce traders were discovered betting on Enron Stocks. The political party books were altered to inflate earnings so that the company appeared to be to a greater extent than profitable that it actu every(prenominal)y was. Borget was diverting company specie into personal offshore accounts. Auditors try to uncover the problem, but Borget and the traders had a furcate repair of books that they kept from the auditors. Kenneth Lay, who was aware of this wrong practice, and encouraged Borget to continue reservation us millions, two months later the separate set of books were brought to the investigators and Enron fired the two traders and Borget had to serve one year in jail.After his biggest property foxr was hurl behind bar Lay needed to find him a new money foolr. So Lay hired Jeffrey Skilling to be the CEO. Jeffrey Skilling would only necessitate job if Enron adopted a mark-to-market accounting strategy. Mark-to-market accounting all(a)owed the company to book dominance gelt on certain take tos now after contracts were signed, regardless of the actual profits that the partake in would eventually make. This gave Enron the ability to expect like they were a profitable company. Skilling put together a performance examine committee that graded employees and fired the tush fifteen percent each year which made the employees really competitive and created a really tough working environment. Traders were very aggressive and they made it to where if you wan ted to be in the market you didnt hold a choice to deal with Enron. employment became the principal(prenominal) encompassed profit for Enron.Skilling hired two guys that became his top lieutenants Lou Pai and Cliff Baxter. They were know as the Guy with Spikes. Baxter was a very smart guy and was Enrons promontory deal maker. He was manic-depressive and top hat friends with Skilling. Pai was the CEO of Enron Energy Services. He wasvery mysterious guy who employees say was never in the office. Pai only seemed to care near two things, money and strippers. He would bring strippers into the office and would put everything he played out in the strip clubs onto an expense reports to be reimbursed by Enron. each of Pais era in the strip clubs caught up to him and caused him to get a divorce. in one case he got a divorce he sold all of his memory and resigned from Enron. He came out of Enron divulge than anyone cashing in his describe and receiving approximately two hundred an d fifty million dollars. The parting of Enron that Pai ran upset a total of more or less one jillion dollars which was covered up by Enron.Enron had success in the shucks market brought on by the dot com company bubble. Enrons computer storage prices increased to read prices. The games was called philia and dump top executives would pump up the stock prices and then distribute their million dollar options. Everyone at Enron was consumed with the stock price. Stock prices were even posted in the elevators for everyone to see. Enron launched a PR campaign to make itself look profitable even with all aspects of the company run poorly. Skillings philosophy was to take high risks because these deals would make more money. One of these high risk deals was grammatical construction a power plant in India, which nobody wanted to do because India could not afford the high prices. The company lost a billion dollars on this project but that fact was covered up by Skilling. The comp any paid out multi-million dollar bonus to executive on non-existent profits. Enron bought out Portland General Energy which gave them main course to the deregulated market of California.All of the employees in PGE had bought their stock so when Enron took over all of the stock PGE stock became Enron. The Portland General Energy workers had incessantly invested their 401k into stock which converted to Enron. These employees continued to buy stock because of their trust in Enron. Enrons main motivation for buying the company was to operate in California since they held the highest demand for energy in the United States. Enrons traders would trick Californias electricity supply and export the energy to another(prenominal) state causing California to possess blackouts. By California having these black outs they embossed the energy rate in the state. Although Enrons stock prices were steadily rising, the company was losing a lot of money. Skilling turned the companyinto cyber space . They move to use broadband technology to sack out movies on demand and trade brave like a commodity. Both of the market strategies failed miserably. By using mark-to-market accounting they book 53 million dollar in earnings on a deal that didnt make a penny. Once they figured out they could not insure the companys losses, the top executives started selling their stock. Enron was named the most admired corporation by case magazine for the six historic period in a row. Jim Chanos, an Enron investor, and Bethany McLean, a percentage reporter, both questioned the companys fiscal statements and stock value.McLean tried to talk to Skilling about the irregularities but Skilling went on the defensive call McLean unethical. Skilling sent three executives to meet with her and Fortunes editor including CFO Andy Fastow. Andy Fastow was the main one keeping Enron running. He was cookery the books do it look like Enron was making a profit even though the company was more than 30 bil lion dollars in debt. Fastow created two limited partnerships, LJM1 and LJM2, for the endeavor of buying Enrons poorly performing stocks to improve its financial statements. Fastow had to go forwards the board of directors to get an exemption to run these two companies as well as Enron. This was a definite conflict of interest. He overly had personal financial pastime in these companys either directly or through a partner. He made millions of dollars defrauding Enron. He pressured the investiture banks such as Merrill Lynch, Citibank to invest by threatening them with loss of Enrons trading if they did not. He had analysts fired who threatened to report Enron for wrong doings. A good move moral philosophy constitution was established when Enron was formed.The problems occurred when the policy was not followed. By not sideline the morality policy put in place, employees and management were encouraged to take risks thereby encouraging unethical port which eventually brou ght down the company. Enron went bankrupt in 2001 due(p) in large part to far-flung fraud in company operating policies. The top executives were the main ones practicing unethical behavior in the company. By the top executives behaving unethically lower level employees followed their example. As pertinacious as Enron was making money no one cared how they went about doing it. In 2001, these unethical actions over the past decade and fractional caught up with Enrons top executives and employees. twenty dollar bill thousand employees lost their job, medical damages and employees also lost1.2 billion in hideaway funds. Enrons top executives were paid bonuses totaling 55 million and cashed in their stock at approximately 116 million dollars. counterbalance though some of the executives made money in the deal they had to face vile charges which placed some in prison house and some still exhaust pending cases.If Enron has survived their collapse in 2001 and I were to be a consulta nt for Enron, I would make sure that the code of ethics brochure that all employees read and signed beforehand taking the job at Enron were followed. Employees and executives would absorb to take part in ethics training to be sure that they watch the book completely. Enron would have to have inscription from all of the executive positions to follow these rules and also enforce them even if the unethical actions were making the company more money. There would have to be a zero permissiveness rule in place that everyone understood. All employees acting inappropriately would be reprimanded as established in the code of ethics booklet.Work citedEnron The Smartest Guys in the Room. Dir. Alex Gibney. By Alex Gibney, prick Elkind, Bethany McLean, and Peter Coyote. Magnolia Pictures, 2005