enron's case
German Jordanian University
Business Ethics (316)
Lecturer: Mr. Montaser Tawalbeh
Case Study
Enron: Were They the Crookedest Guys in the Room?
Case Summary
Enron has become the classic case on business ethics. Enron formed after the merger of Internorth Incorporated and Houston Natural Gas in 1985. On January 1, 1987, as part of the merger agreement, Ken Lay became the new CEO. In 1990, Ken Lay hired Jeffrey Skilling from McKinsey and Company as the Head of Enron Finance. By 1995, Enron had become the largest independent natural gas company in the United States. In 1997, Skilling became president and Chief Operating Officer at Enron. Ken Lay’s goal was for Enron to have the same brand recognition as AT&T.
Enron’s long term strategy depended on convincing the public and the federal government that deregulation of the energy industry would create a more competitive marketplace. Energy deregulation effectively “unbundled” the industry value chain so that companies were free to choose which parts to operate. Firms didn’t have to generate or transport energy in order to trade in energy. In July 2000, Enron released its Code of Ethics policies to its employees. The document was 63 pages long with two additional blank pages for notes. From 1998 to 2000, the total compensation paid to the top 200 executives at Enron went from $193 million to $1.4 billion. The top three executives pay went from tens of million in 1998 to over $100 million each by 2000. In December 2000, Enron announced president and chief operating officer, Jeffrey Skilling, would take over as chief executive from Kenneth Lay in February 2001. Ken Lay would remain as chairman. At this time, Enron stock hit a 52-week high of $84.87.
In March 2001, Bethany McLean from Fortune magazine wrote an article titled “Is Enron Overpriced?” Ms. McLean asked a simple question, how does Enron make its money? Enron had shifted from a traditional gas-pipeline business to “wholesale energy operations
Business Ethics (316)
Lecturer: Mr. Montaser Tawalbeh
Case Study
Enron: Were They the Crookedest Guys in the Room?
Case Summary
Enron has become the classic case on business ethics. Enron formed after the merger of Internorth Incorporated and Houston Natural Gas in 1985. On January 1, 1987, as part of the merger agreement, Ken Lay became the new CEO. In 1990, Ken Lay hired Jeffrey Skilling from McKinsey and Company as the Head of Enron Finance. By 1995, Enron had become the largest independent natural gas company in the United States. In 1997, Skilling became president and Chief Operating Officer at Enron. Ken Lay’s goal was for Enron to have the same brand recognition as AT&T.
Enron’s long term strategy depended on convincing the public and the federal government that deregulation of the energy industry would create a more competitive marketplace. Energy deregulation effectively “unbundled” the industry value chain so that companies were free to choose which parts to operate. Firms didn’t have to generate or transport energy in order to trade in energy. In July 2000, Enron released its Code of Ethics policies to its employees. The document was 63 pages long with two additional blank pages for notes. From 1998 to 2000, the total compensation paid to the top 200 executives at Enron went from $193 million to $1.4 billion. The top three executives pay went from tens of million in 1998 to over $100 million each by 2000. In December 2000, Enron announced president and chief operating officer, Jeffrey Skilling, would take over as chief executive from Kenneth Lay in February 2001. Ken Lay would remain as chairman. At this time, Enron stock hit a 52-week high of $84.87.
In March 2001, Bethany McLean from Fortune magazine wrote an article titled “Is Enron Overpriced?” Ms. McLean asked a simple question, how does Enron make its money? Enron had shifted from a traditional gas-pipeline business to “wholesale energy operations