Once a sound company listed in fortune 500, Enron, lead to downfall because of deceptive accounting system incorporated within the organization. Enron’s dubicious finance finally collapsed in Dec 2, 2001 as it filed Bankruptcy in New York Bankruptcy court.
The corporate culture of Enron focused on financial performance neglecting the stakeholder’s value .The relentless emphasis on the importance of the shareholder’s value created the conditions for the disconnection of Enron from their essential moral underpinnings, encouraging them to concentrate exclusively on financial performance, and to neglect stakeholder’s common interest, but the essential interests of the economies and communities in which they operate..The problem with established economic theories of corporate governance is that they misconceive the irreducible corporate governance, at the same time as underestimating the complexity of the phenomenon. (Clarke, 2005)
The ‘rank and yank’ system implanted by Skilling created the worst situation as the employee started the rivalry between each other in terms of making money at any cost violating the corporate culture. Fewer rewards were given to those who produced sustainable financial fortune and the bottom ranked employees were forced out
The bad fortune of the company was destined by Enron’s management incentive system. Destructive business culture was implanted as Enron primarily focused on employees self worth rather than company’s worth. Extra rewards were provided to those candidates who contributed on promoting productivity. Those who contributed themselves on controlling the existing resources were not skewed with any incentives. The company’s profit was under a billion dollar but the average compensation of top 200 executives was over 1.4 billion. Employees at the executive level were promoted quickly that left the lack of good executive skill at the vacant level.... [continues]
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