Prof. Fred Friend
March 27, 2014
The Downfall of Enron Corporation
“Ethics and integrity are at the core of sustainable long term success … Without them, no strategy can work and, as Enron has demonstrated, enterprises will fail. That’s despite having some of the ‘smartest’ guys in the room.” by Richard Rudden. As the quotation states, ethics and integrity play a key role in the success of any corporation; through these principles, companies can ensure their compliance with law, build a strong relation with their stakeholders, and create a positive reputation in the market. However, this was not the case with Enron, America’s energy giant. This company’s mission statement was stated that its performance was based on four principles: respect, integrity, communication and excellence. Unfortunately, this mission statement was not reflected on Enron’s business performance and it was one of the biggest scandals in the 21st century due to its accounting irregularities and unethical practices. This paper will discuss the history of Enron’s collapse, the regulations passed in the U.S. to prevent such a case from happening again, and the lessons to be learned from this case. Enron, the largest marketer of gas and electricity in the U.S., was established in 1985 through the merger of two gas companies, Houston Natural Gas (HNG) and InterNorth. Soon after that, Kenneth Lay, who had been the chief executive officer of HNG, was elected to become the CEO and chairman of Enron. Lay played a key role in the development of Enron as he had transformed the company from a simple gas corporation to a giant energy corporation worth $68 billion. In the 1990s the company has engaged in trade, not only gas but also electricity. Besides that, Enron entered and expanded into new markets such as steel, wood fiber, and financial derivatives. By 2000, it became the largest trader in the electricity market with 21,000 employees in forty countries and was ranked...
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