Enron: Questionable Accounting Leads to Collapse

Enron: Questionable Accounting Leads to Collapse

Songhoe Koo

BUSI 472-B03

Liberty University

Abstract

Enron was one of the big and succeed companies in the world. “The Enron Corporation was created out of the merger of two major gas pipeline companies and once ranked among the top Fortune 500 companies” (Ferrell, 2011, p.419). Enron was bankrupted because of its corporate culture, negative contribution of Enron’s banker, auditors, and attorneys, and the company's Chief Financial Officer plays in creating the problems. Enron’s corporate culture is defined as the one word, which is “arrogant”.  For this reason, top managers are blind with love of money and success. Also, Enron’s banker, auditors, and attorneys contributed bankruptcy of Enron because of their greed of money. In addition, Chief Financial Officer did fraud, money laundering, conspiracy, and one count of obstruction of justice. CFO forgot the role of job, and made to earn much money for CFO’s own self. Enron’s case shows how top managers’ greed destroyed the company with many ways.

Keywords: Enron, Arrogant, Money, Success

Introduction

        There are many reasons of company’s collapse, but one of the major reasons of company’s collapse is the money. Because of lack of the money, many companies were bankrupted. Among the bankrupted companies, Enron was the successful company in the past. “The Enron Corporation was created out of the merger of two major gas pipeline companies and once ranked among the top Fortune 500 companies” (Ferrell, 2011, p.419). However, Enron was bankrupted because of its corporate culture, negative contribution of Enron’s banker, auditors, and attorneys, and the company's Chief Financial Officer plays in creating the problems.

How did the corporate culture of Enron contribute to its bankruptcy?

        Each company has its corporate culture for its company, employees, works, and successes, and culture is important to workers because corporate culture in company creates good ethical behaviors. According to Matt Dunning, "Rik Kunnath said, corporate culture has more to do with the success of a company than any other single factor, and It's the combination of a company's personality and its beliefs that guide its actions and behavior” (Dunning, 2013, Dec. 2). Good corporate culture is important because it creates company’s characteristics and leads success of a company.

        However, Enron didn’t have good corporate culture, so Enron’s corporate culture contributed to its bankruptcy. According to O. C. Ferrell, “When Describing the corporate culture of Enron, people like to use the word arrogant, perhaps justifiably” (Ferrell, 2011, p.422). There was no ethical behavior in corporate culture because Enron’s corporate culture was described as the word “arrogant”. According to The Washington Post, “Contemplating Enron's self- destructive arrogance, Sen. Byron Dorgan has spoken quite accurately of a culture of corporate corruption" (The Washington Post, n.d.). For success of company, workers and top managers have to know what is right and wrong action and behavior for company, but Enron was corrupted. “The culture also was about a focus on how much money could be made for executives. Ethical behavior was not put into practice. Instead, integrity was pushed to the side at Enron, particularly by top managers” (Ferrell, 2011, p.422). Because of Enron’s arrogant from success, Enron’s corporate culture focused on benefit of company such as money, success, and so on. Enron didn’t have ethical behavior and conscience because they didn’t care about importance of ethics. For this reason, Enron’s arrogant corporate culture contributed its bankruptcy. It started from top managers’ greed, so Enron focused on money rather than ethics. CEO, CFO, and others wanted and illegally earned much money because they created arrogant culture, and it was late to fix it. If Enron followed business ethics and had good corporate cultural and ethical behavior, Enron would not be bankrupted. Thus, arrogant corporate culture of Enron led its bankruptcy for maintaining its culture.

In what ways did Enron's bankers, auditors, and attorneys contribute to Enron's demise?

        According to Business Case Studies, “Business ethics are moral principles that guide the way a business behaves. The same principles that determine an individual’s actions also apply to business. Acting in an ethical way involves distinguishing between “right” and “wrong” and then making the “right” choice” (Business Case Studies). In business, people can’t get a success by alone, so ethical behavior of company is important in interaction with other people or business. However, Enron’s bankers, auditors, and attorneys just focused their success, and it was contributed to Enron’s demise by unethical behavior.