Enron case Essay Example

Enron Case Analysis

Relationship between Enron’s Statements of Values and the Reality of its Underlying Business

The statement of values is vehemently directed towards ensuring that the firm’s Code of Ethics is routinely followed by the existing employees. It requires that the employees conform and reflect on specific policies in order to align their actions with the company’s overall objectives and vision. However, this was not the case as can be shown below;

  1. Respect; Enron requires that employees including the management team to treat others just in the way they would like to be treated. Thus, the firm does not allow room for arrogance, or even ruthlessness. However, this is not so and especially coming from the CEO; Jeffrey Skilling who was fond of using abusive language especially on analysts and investors that required information on how the firm was making its money. In fact, his arrogance was his major undoing the resulted to the company’s collapse at the end.

  2. Integrity; is a value that requires working with stakeholders openly and honestly. However, this is not the case with the company that adopted peculiar accounting treatments like mark-to-market and HFV as a way of covering up for their losses and presenting a deceitful picture to these stakeholders of its profitability.

  3. Communication; is a value that requires employees to effectively communicate. This is however not the case. At point when Jeffery Skilling got a call from a journalist from Fortune on how the company was making money, he adamantly refused any communication and went ahead to cover it up with sending CFO to try and intimidate the journalist from publishing an article; ‘Is Enron Overprices?’ in Fortune magazine. It can also be argued that Enron failed to publicly provide a balance sheet for public scrutiny while it was a requirement to do so.

  4. Excellence; is a value that requires every employee to put in their best. However, it can be seen that these employees especially traders were all executing tasks with intense risks; CFO, Faston engaged in dealings outside the company’s interests like in the case of LJM whose objective was solely to amass personal wealth as opposed to meeting stakeholder’s interests and expectations.

Why the Relationship Develop & Flourish

The relationship developed due to greed from the part of the management as well as political support from top notch political base. It can be noted that Ken Lay had a special relationship with George Bush as he funded most of his political campaigns and as a reward, he got support in terms of government subsidies and an opportunity to head the deregulation of the energy market in the US.

Extend to which the Fault lie within and Outside the Company

It can be safely argued that the immediate downfall of Enron was basically due to immoral levels of greed amongst the management team at the expense of its underlying moral and ethical values (Fisch, 2006). It can be seen that Enron lacked an authoritative source of moral reasoning thereby resulting to it overlooking legal rules as restrictive framework for its actions. However, even so, the reliance on legal set limits presents an issue especially in the corporation’s enormous capacity to improve on the constraints through political activities (Fisch, 2006). This is major reason why the fault lies outside the company given that it enjoyed extensive and full support from the Bush administration in relation to being allowed to deregulate the energy market and adopt inappropriate accounting policies like the mark-to-market accounting treatment, which was beneficial in covering up for its poor performance over the years.

References

Fisch, JE. (2006). ‘The Bad Man goes to Washington: The Effect of Political Influence on Corporate Duty’ Fordham Law Rev, 75(3), 1593-1614.

Smartest Guys in the Room’. Accessed from https://youtu.be/-q44fZFwQzU