The Fall of Enron: the Lack of Organizational Behavior 1

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Enron
Running head: The fall of Enron: The lack of organizational behavior

The fall of Enron: The lack of organizational behavior

The fall of Enron: The lack of organizational behavior

Enron, once king of the castle, was dethroned in 2001 in a series of fraudulent activities led by the CEO John Skilling. Years prior, Enron emerged as one of the worlds leading companies in electricity and expanded into many other sectors. In 2000, Enron reported revenues of nearly $101 billion. Fortune magazine named Enron as “most innovative” company for 6 years in a row at that point. Just when investors felt Enron was at its peak, a series of events led Enron to file for bankruptcy in December 2001. How can a company so profitable with so many ventures file bankruptcy? One must focus on the organization behavior of employees starting from the CEO and other executives.

Enron took advantage of deregulation in the ‘70’s in which they added different ventures. With new ventures and continued dominance, investors believed the business model was a success. Investors and employees pride emerged as Enron reported earnings of $101 billion in 2000. Christopher Kobrak (2009) states “Despite some ominous warning signs, such as cost of capital that exceeded Enron’s return on capital employed, through the 1990s few expressed qualms about Enron’s business model and its rapid diversification into new sectors.”

In 1997 Enron used offshore accounts to hide losses which were not reported on financial statements. By hiding losses, Enron was able to inflate numbers and assets which were nonexistent. The deceptive financial moved caused the downturn of the company. According to Kobrak (2009) Enron’s losses on speculative and strategic moves reached such proportions that management desperately turned to a qualitatively new and more reckless gambit: improperly structured partnerships, hedge transactions,...
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