The Collapse of Enron Quinlan Bludworth Ottawa University 01/15/2015 The Collapse of Enron Companies and corporations crash and burn all of the time in our world. But none are more infamous than the collapse of Enron. Through shady accounting and lying to their investors and customers, Enron went from being one of the world’s top 10 largest companies to history with in a matter of days. “Enron, the champion of energy deregulation that grew into one of the nation's 10 largest companies, collapsed yesterday, after a rival backed out of a deal to buy it and many big trading partners stopped doing business with it” (Oppel 2001) Enron lied to its potential investors, and as its several fabricated walls of deceit finally fell and people can see what was really going on with the company, they backed out. Because of Enron’s shady accounting and false representation of itself, their stock price dropped dramatically, and they became one of the biggest companies to ever go bankrupt.
Enron started as a Natural Gas Pipeline Company in 1985 as Houston Natural Gas and InterNorth merged. It became a trading powerhouse as it started trading energies and launched into new markets. Enron had accommodated in a financial scandal, involving itself and its accounting firm. The irregular accounting practices, including manipulating stock prices, caused Enron to have to file bankruptcy in December of 2001 (Thomas, 2002). The scandal is the most significant corporate failure in the United States since the collapse of many savings and loan banks during the 1980s (Hanson, 2002).
Examining a Business Failure Examining a Business Failure Introduction Enron Creditors Recovery Corporation (ECRC), formerly called Enron, an American energy company, made history with a corporate scandal that revealed fraud and corruption of management in how the company’s financial standing was reported. This paper will discuss how organizational behavior can explain the enormous failure within management that resulted in Enron’s bankruptcy in 2001. Additionally, influences between management and leadership failures will be explored as well as the impact of the company’s structure. Organizational Behavior “In an organizational world characterized by cutbacks, expectations of increasing worker productivity, and tough competition in the marketplace, it’s not altogether surprising that many employees feel pressured to cut corners, break rules, and engage in other forms of questionable practices” (Robbins, 2007). In the case of Enron, owners and managers were compelled to hide financial losses and the accounting firm responsible for auditing Enron was found to be negligent by destroying documents pertinent to the Enron audit.
Bank Of America’s acquisition of Merrill Lynch Along with the fire sale of Bear Stearns and the bankruptcy of Lehman Brothers, the rescue of Merrill lynch confirmed the worst fears about the financial crisis. After a weekend of whirlwind deal-making, Merrill Lynch had sold their troubled brokerage firm to the Bank of America Corporation, dodging the financial sinkhole that was swallowing Lehman Brothers. As per some current and former Bofa executives and employees, the merger was really messy. On Saturday, September 13, Ken Lewis (Bofa CEO) and John Thain(Merrill CEO) met to discuss a strategic relationship. Thain proposed a 10% percent minority investment in Merrill, but Lewis wanted complete acquisition.
Kenneth Lay former CEO was indicted on 11 criminal counts of fraud and making misleading statements. Jeff Skilling was indicted on 35 counts of wire fraud, securities fraud, conspiracy, making false statement on financial reports, and insider trading. Hence both were responsible for collapse of Enron. There are a several reasons that led to Enron’s collapse namely; a corrupt leadership at the top, violation of laws that were not impose by the company’s CEO, and Lack of regulation Enron had one of the best ethics code in the industry. First, not work out with written ethics and compliance codes clearly describe how was the company collapse, moreover corruption from leaders at the top and middle level of organizations is a recipe for disaster.
With all the adjustable rate programs, it started the downfall of the mortgage industry even though we did not feel the effect until three to four years later. The mortgage companies and lenders implemented several programs which back fired on the industry, which has caused a negative effect on our economy. Many real estate professionals sat back helplessly knowing this was going to happen, it was nothing we could do to stop this avalanche affect from exploding causing a ripple effect on the economy. The downfall of the real estate industry has triggered a negative cause and effect on the economy. Real estate plays such an enormous role in the survival of our economy which is why it is important it does well in order for our economy to prosper.
What a Tangled Web: The Case of Olympus Angel PinaHardin ACCU 620 November 8, 2013 Brandman University What a Tangled Web: The Case of Olympus Introduction Organizations are rocked by scandals almost every day. From Enron to WorldCom, in the past 20 years, financial and accounting scandals have become the “norm”. Unfortunately, for Olympus, the story is no different. Rocked by an accounting scandal the public and investment community has lost trust in Olympus. Additionally, Olympus lost major shares in the market and was almost delisted from the Japanese and New York Stock Exchanges.
This was considered to be one of the biggest corporate bankruptcies of all time, and it stunned virtually everyone in the financial world. Investors were left out in the cold, with millions losing their life’s savings in addition to their retirement funds and pensions. Analysts were dumfounded after news of the fall of a company whom they recently validated as a ‘strong buy,’ dominated the airwaves. There was speculation that several of its top corporate executives could possibly spend time in jail for their involvement in sophisticated fraudulent account schemes, something that later occurred. During the mid to late nineties, Enron Corporation began to grow at an unbelievably rapid pace.
Remodeling HR at Home Depot Vol. 53 No. 11 After cutting 1,200 HR jobs, the retailer’s leaders found that less may be more. 11/1/2008 By Robert J. Grossman Home Depot’s announcement last April that it was slicing 1,200 human resource positions—more than 50 percent of its HR staff—by eliminating HR managers from each of its nearly 1,970 U.S. stores sent chills through the HR community. With the housing market in the doldrums and the economy teetering on recession, the world-leading hardware and home improvement retailer had to make tough decisions.
The most harmed people are the employees. They were not only dismissed after the collapse but also all their saving and retirement plan were very tie to Enron shares system. Thus they ended up completely empty handed. The shareholders have been severely affected also losing all their important investments. 3.