The Failed Corporate Culture of Enron

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The Failed Corporate Culture of Enron

High risk accounting, inappropriate conflicts of interest, extensive undisclosed off-the-books activity, excessive compensation – these are some of the headings of the report prepared by the U.S. Senate's Permanent Subcommittee on Investigations titled "The Role of the Board of Directors in Enron's Collapse." (Permanent Subcommittee on Investigations, 2002) In February, 2002, Enron's former Chief Executive Officer Jeffery Skilling had testified before members of the Senate Commerce, Science and Transportation Committee that Enron was a financially sound company the day he resigned in August 2001, just months before the company's financial implosion. But the Enron debacle has, as the Houston Chronicle put it, "all the earmarks of classic tragic drama in which hubris causes the fall of the mighty," (Ivanovich, 2002) and, Mr. Skilling's sworn testimony to the contrary, the decisive role that Skilling and the company's other top executives played in the bankruptcy of this $63 billion company now seems incontrovertible. Indeed, from the point of view that the business culture at Enron contributed importantly to the company's demise, the blame for this financial tragedy can be pretty squarely placed on Skilling's shoulders, and the values he promoted among top and mid-level management during his five year stewardship of the company from 1996 to 2001. What was it about the ethos Skilling created among Enron's employees, particularly upper management, that made, in hindsight, the demise of the company nearly inevitable? Skilling, who in Senate testimony has described the reason for Enron's collapse as a "classic run on the bank," had for years focused on "taking profits now and worrying about the details later," as one former employee claimed. (Fowler, 2002) Whereas former Chief Operating Officer Rich Kinder from 1990 to 1996 had demanded his managers focus on cash flow and meeting earnings targets, another former employee...
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