Enron Scam: Corporate Culture, Leaders, Financial Statements

This article discusses the Enron Scam, including the corporate culture, leaders, and financial statements. It covers the downfall of Enron, the role of its leaders, and the unethical practices that led to the scandal.

Running head: ENRON SCAM
Enron Scam
Name of the Student
Name of the University
Author note

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Table of Contents
Question 1........................................................................................................................................2
Question 2........................................................................................................................................2
Question 3........................................................................................................................................3
Question 4........................................................................................................................................3
Question 5........................................................................................................................................4
Question 6........................................................................................................................................4
References........................................................................................................................................6

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Question 1
The leaders of Enron were immensely responsible for the financial scam that shook the
level of confidence of all the stakeholders of the company (Dibra 2016). The senior level leaders
of the company were able to hide billions of dollars which were in debt due to failed projects and
dealings with other business organizations. Andrew Fastow who was the chief financial officer,
making pact with other major leaders of the company misled the directors of the company and
the audit committee regarding high risk account practices and also pressured Aurther Andersen
to ignore the escalated issues related to the scandal. The key persons who were responsible for
this major financial scam are Jeffrey Skilling, Andrew Fastow, Kenneth Lay and Rebecca Mark
(Bennett 2018).
Question 2
The financial statements of Enron became confusing to the shareholders of the company
as well as to the employees of the organization (Bennett 2018). It was found that unethical
practices which were present in the organization and the complex business model of the
company required that the management should have a limited accounting capability but the
management of the organization back then misrepresented the earnings of the company and
unethically modified the balance sheet of the business organization so that the employees and all
the shareholders believe that the company is doing good business (Dibra 2016). In this regard, it
is worthwhile to mention that the key persons of the company who are Rebecca Mark, Kenneth
Lay, Anfrew Fastow and Jeffry Skilling created off balance sheet vehicles and financial
structures which are very complex in nature and dealings which were so bewildering that very

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few people who are the employees and the shareholders could have the capability to understand
them (Brands 2016).
Question 3
When the employees and the stakeholders of Enron found that the stock prices of the
company fell from 90 Dollars per unit to below 1 dollar they filed lawsuits immediately. In
between the years of 2000 to 2002 the share prices of the company experienced the huge
downfall and the employees were till then miss leaded by the management of the business
organization (Markham 2015). When the employees of the organization got a clear picture of the
scenario, more than 20000 employees of the company won a law suit of 85 million dollars in the
year of 2004 as a compensation of the 2 billion dollars they lost from their pensions. Each of the
employees were granted more than 3000 US dollars and the management of Enron had to held
auctions to sell off the assets of the company and those include the logos, art and even the
pipelines of the company (Dibra 2016).
Question 4
When the scandal of Enron came into public awareness it was seen that the management
or the leaders of the business organization paid a fortune to sustain their high flying image in
front of the media so that the image of the company earns them a good profitability. The leaders
lavished money on the Washington insiders and even on the financial opinion makers and the
financial predictors of that time (Bennett 2018). They used money to maintain an extensive
relation between the investors and public (Brands 2016). The above mentioned information is
enough to exhibit how the unethical leaders of the business concern managed to keep away the
media from covering their scandal (Dibra 2016).

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Question 5
In the preliminary stage the communication in Enron was downward and that reveals that
the directions flowed from the chambers of the directors and the subordinates had to follow or
obey the orders that has been forwarded to them (Roy 2015). In this way the orders start at the
upper most level of the business organization and maintain the hierarchy and get forwarded to
the subordinate staffs and they do not have anything other things to do or say apart from obeying
the orders (Carlson and Sullivan 2018).
On the other hand, later the communication in Enron changed to upward communication
style and it was seen that in this process information started to flow from the lower levels of the
hierarchy to the upper most levels and in this way the subordinate staffs gets the opportunity to
share their views and therefore this strategy became more popular (Roy 2015). In this way, the
managements of the business organizations will be able to sustain a healthy work environment as
the employees will have a greater satisfaction as their feelings and views are given more priority.
In this way the organizational performance also gets upward (Brands 2016).
Question 6
It is a matter of fact that Enron scandal did not take place accidentally as it was facilitated
by the corporate culture of the company. The specific corporate culture which was introduced by
Jeffrey Skilling encouraged fraud and greed as it was seen by the energy traders who were
extorting the energy consumers of California (Bennett 2018). The focus of the management was
rather on creating real value and the focus of the management of the business organization was to
sustain the appearance of the value and the rising stock prices. In this regard, it is worth
mentioning that it was intensified by a corporate culture which was aggressive and competitive

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and rewarded the results which were achieved at any cost (Carlson and Sullivan 2018). The
internal integrity of the business organization was challenged and the scandal was opposite in
nature. The CEO of the company back then leveraged political connections in the administrations
of Bush and Clinton’s era and also influenced Wall Street for favorable treatment (Brands 2016).
Therefore it can be said that the corporate culture introduced by Jeffery Skilling was significantly
responsible for the downfall of one of the most innovative business organizations of America
(Roy 2015).

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References
Bennett, C., 2018. Bad Blood Has the Goods on Theranos. Genetic Engineering &
Biotechnology News, 38(13), pp.1-22.
Brands, M., 2016. The influence on goodwill impairment: the factors behind the tool. A
comparative research in the EU.
Carlson, S.C. and Sullivan, G.F., 2018. ETHICS AND THE 2003 MUTUAL FUND
SCANDAL. Current Topics in Management, 10, p.195.
Dibra, R., 2016. Corporate Governance failure: the case of Enron and Parmalat. European
Scientific Journal, ESJ, 12(16).
Markham, J.W., 2015. A financial history of the United States: From Enron-era scandals to the
subprime crisis (2004-2006); From the subprime crisis to the Great Recession (2006-2009).
Routledge.
Roy, M.N., 2015. Statutory Auditors' Independence in the Context of Corporate Accounting
Scandal: A Comparative Study of Enron and Satyam. IUP Journal of Accounting Research &
Audit Practices, 14(2), p.7.