The Failed Corporate Culture of Enron
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 and a
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 and a
References: Amazing disintegrating firm: The tragedy of one company 's rise and fall. (2001, December 7). The Economist. Retrieved September 24, 2004 from http://www.cfo.com/article.cfm/3002568/c_3036065 Antosh, N Bodily, S. & Bruner, R. (2001, November 19). What Enron did right. Wall Street Journal. Retrieved September 24, 2004 from http://interactive.wsj.com/fr/emailthis/retrieve.cgi?id=SB1006122926482037200.djm Bodily, S Emshwiller, J. R., & Smith, R. (2001, December 5). Corporate veil: Behind Enron 's fall, a culture of secrecy which cost the firm its investors ' trust. The Wall Street Journal, p. A1. Executive stock trades in 2001 [table]. The Houston Chronicle. Retrieved September 24, 2004 from http://images.chron.com/content/news/photos/01/12/08/graphics/popup_stocks.html Financial Accounting Standards Board Fowler, T. (2002, October 20). The Pride and the fall of Enron. The Houston Chronicle, October 20, 2002. Retrieved September 24, 2004 from http://www.chron.com/cs/CDA/story.hts/special/enron/1624822 Ivanovich, D Seba, E. (2004, January 22). Ex-Enron accounting chief is indicted. Reuters New Service. Retrieved September 24, 2004 from http://www.truthout.org/cgi-bin/artman/exec/view.cgi/5/3348 Tiller A