Enron: Tone at the Top
Enron: Tone at the Top
The fall of Enron is not just one of the largest bankruptcies in U.S. history, but in my opinion, a landmark case study of the lack of business ethics in an organization. Enron’s downfall, along with the demise of Arthur Andersen, one of the largest public accounting firms at the time, brought about a swift change in U.S. regulations governing how publicly traded companies reported their financials. While the top brass at Enron pled ignorance to the fact that they had no control of what was happening at the employee level, there was ample evidence that they were indeed, the architects behind the series of unethical practices that went on in the organization.
Enron, one of the largest corporations in America and once ranked Fortune magazine’s “Most Admired Companies” went down in 2001 after they were exposed of defrauding their investors in a series of creative ways. Enron was known for being an innovative company in the energy, technology space but much of their innovation seemed to lie in how they managed to hide their debts and cover their losses through unscrupulous means. They would book hypothetical profits on projects and joint ventures that had not yet launched and on the day a deal was signed. They would hide their debts through the use of complex Special Purpose Entities (SPEs). They would solicit support from top tier investment banks by giving them lucrative deals to work on. All this and more was conducted with one clear objective in mind: to make as much money as possible through manipulation. Everyone was happy as long as there was money to be made. Ethics was out the window. Manipulating financial books and records, exploiting deregulated markets became their predominant strategy -all in the name of maximizing profits and pushing up the company’s stock price. When indicted, the chief executives of Enron, Kenneth Lay (former Chairman and CEO) and Jeffrey Skilling (CEO), amongst others, continually denied their involvement.
The fall of Enron is not just one of the largest bankruptcies in U.S. history, but in my opinion, a landmark case study of the lack of business ethics in an organization. Enron’s downfall, along with the demise of Arthur Andersen, one of the largest public accounting firms at the time, brought about a swift change in U.S. regulations governing how publicly traded companies reported their financials. While the top brass at Enron pled ignorance to the fact that they had no control of what was happening at the employee level, there was ample evidence that they were indeed, the architects behind the series of unethical practices that went on in the organization.
Enron, one of the largest corporations in America and once ranked Fortune magazine’s “Most Admired Companies” went down in 2001 after they were exposed of defrauding their investors in a series of creative ways. Enron was known for being an innovative company in the energy, technology space but much of their innovation seemed to lie in how they managed to hide their debts and cover their losses through unscrupulous means. They would book hypothetical profits on projects and joint ventures that had not yet launched and on the day a deal was signed. They would hide their debts through the use of complex Special Purpose Entities (SPEs). They would solicit support from top tier investment banks by giving them lucrative deals to work on. All this and more was conducted with one clear objective in mind: to make as much money as possible through manipulation. Everyone was happy as long as there was money to be made. Ethics was out the window. Manipulating financial books and records, exploiting deregulated markets became their predominant strategy -all in the name of maximizing profits and pushing up the company’s stock price. When indicted, the chief executives of Enron, Kenneth Lay (former Chairman and CEO) and Jeffrey Skilling (CEO), amongst others, continually denied their involvement.
References: Gibney, Alex (Director). (2005). Enron: The Smartest Guys in the Room. [Documentary]. United States: Magnolia Pictures.