Enron Background

Only available on StudyMode
  • Topic: Enron, Jeffrey Skilling, Kenneth Lay
  • Pages : 3 (337 words )
  • Download(s) : 113
  • Published : September 15, 2014
Open Document
Text Preview
ENRON
Background and Overview:
Enron was famous in the business world.
Known as the innovator, technology powerhouse and a corporation. It was named the America’s most innovative company for six years by Fortune’s Most Admired Companies survey.

The fall of Enron in 2001 shattered not just the business world, but also the lives of the employees and the people who believed that their soar to greatness was genuine. It turns out to be the America’s biggest corporate bankruptcy.

Before the fall of Enron:
The sale of natural gas and electricity.
It turn from a energy company to trading company.

Jeffrey Skilling’s mark-to-market method.
The method requires estimations of future incomes when a long-term contract is signed. The price or value of a security is recorded on a daily basis to calculate profits and losses.

Special Purpose Entity
Are legal entities that arte created only to carry out a specific or temporary tass. To handle assets either by funding or by risk management.
To dodge the traditional accounting convention.
To hide debts.

The Fall of Enron:
The used of mark-to-market method became backfired.
It has corrupted books and had allowed the company to ba far too optimistic in its assumptions about the future profits.

Lack of responsibility of doing the company’s projects.
The employees just want to get their bonuses.

Performance of the employees are involved in the Enron’s bankruptcy. Instead of cooperation, it turned into a competition.
The employees are getting motivated of bonuses and scared of losing their job if they did not perform well.

Creating multiple SPEs.

People behind Enron’s Bankruptcy:
Jeffry Skilling
Responsible for implementing the mark-to-market method.
Andrew Fastow
Mastermind of the Special Purpose Entities.
He made complicated financial structures to hide Enron’s losses and debts. Kenneth Lay
Involved in conspiracy and fraud.

Effect of the Fall of Enron:
Affected at least 21,000...
tracking img