The Collapse of Enron
Who were the stakeholders involved in, or affected by, the collapse of Enron? How and what degree were they hurt or helped by the actions of Enron management?
Some of the stakeholders were directly responsible for Enron’s collapse. The deregulation of the 1980s presented an opportunity to become the “gas bank” reducing market risk. After this success Kenneth Lay, Jeffrey Skilling and Andrew Fallow became the market makers, buying and selling over 1,800 products. These top executives’ unethical practices and their internal control system manipulated the law to keep the company’s reputation but were responsible for the collapse.
After the collapse the management ...view middle of the document...
The legal implementation of strategies was something that was one of the major causes of the collapse.
Corporate culture encouraged people to hide failure rather than acknowledge it as part of a systems-orientated learning curve. Corporate culture guides the way in which senior management interprets the information gathered to balance organizational interests with those of its public (Bowen & Heath, 2005).
Enron encouraged and compensated employees with investment in the company. This was a big issue at the time of the collapse; employees and retirees lost everything and were left with empty hands. By compensating employees, this can be considered an issue since employees did not question any of the decisions of management, as long as they received rewards.
As mentioned earlier accounting was a fundamental factor that attributed to Enron’s’ collapse. The unethical reasoning was implemented on procedures taken by management and accountants. Enron failed to take a systems perspective by considering the larger social environment in its decision-making. In the maverick manner of its culture, Enron did not regard the ethical ramifications of its decision making or how those decisions would be evaluated by the public in the environment surrounding its system (Bowen & Heath, 2005). When any of the employees raised any concerns about the unethical practices, senior executives ignored, fired, and humiliated them.
The political relations between the corporation and policy-makers gave Enron advance notice when deregulation started. Many politicians had ties with Enron, because the company was a big contributor to political campaigns. This close relationship allowed the company to get exceptions to audits and to go around the bush, in a few occasions. But even when the corporation had good political contacts, when the collapse happened, no one was there to help them survive. Enron requested help to get more money but it was denied on that occasion.
What steps should be taken now by corporate managers, stakeholders, and policy makers to prevent a similar event from occurring in the future?
Practice of good ethical methods. In Enron’s case the accountants and executives found loopholes to conduct business. These practices were not illegal but unethical with worse results than if the law was broken.
Share holders need to be more involved and when information is provided, if any questions are raised, they need to be addressed. In addition, when statements looked at suspicious they need to be look more...