Enron Case Study Summary

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Enron Case Study
The case of Enron is a fascinating one. United States is a country where auditing and accounting principles are so strong. How can something take place on such high level in the United States? The Enron case demonstrates the need to reform the accounting and corporate governance practices in the United States. Moreover, the Enron case made government officials to pay close attention to deregulated energy market. Some of the aspects that struck me are discussed below. One of the aspects that struck me was the vision of the top management. Enron was in the business of energy, but Kenneth Lay built management team of MBAs, not individuals specialized in gas and energy field. My view is that top management has to have a clear vision. It seemed that Kenneth Lay vision of the company was distorted. Enron transformed from an energy company into an investment company. Hence, the management team was comprised of traders and investment bankers who had very little knowledge of the energy business. As the business model of Enron changed so did the corporate culture. The culture was “Get it done. Get it done now. Reap the rewards.” The new business was the buying and selling of commodities. The employees were rewarded for business deals regardless of long-term consequences. I feel this kind of reward system is not beneficial to companies; it is very short-term view of business. Moreover, analysts were derided when they asked questions about the earnings-report. These actions points that the corporate culture was of Enron was disruptive. This raises the questions on the role of boards of directors. It seems like the boards of directors of Enron had very little knowledge about the activities of Fastow and Lay. It’s interesting that the boards of directors had so little knowledge of thing happening in the company. The takeaway from this is that boards of directors should pay close attention to the management behavior and money generating strategies. The...
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