Disregarding its Ethical Code. Enron had its own set of Ethical Code, but it became redundant because the top managers at the company hardly paid any heed to it. The corporate culture at the company was focused on making "deals" and increasing Enron's share value, while the "outdated, theoretical concept of ethics and morality" was kept on the back-burner.
Enron's 'ethics' was personified by Kenneth Lay's exercising of his stock options and pocketing profits, even as he was promoting Enron shares as a bargain to employees. It was also reflected in the action of some Enron executives who pressurized a brokerage company (UBS PaineWebber) to take action against a broker who advised some Enron workers to sell their shares. Other Enron employees, down the line, were therefore more likely to follow the example of its top executives in looking after their own interests and driving up the share value by whatever means, rather than adhering to the company's 'Ethical Code.'
Special Purpose Entities (SPEs). Enron was able to hide its precarious financial position and highly risky operations largely through circumvention of accounting rules in order to artificially increase earnings through Special Purpose Entities (SPEs). Although SPEs are legitimate instruments to access capital or hedge risk by using them as limited partnerships, without having to report debt on its balance sheet, Enron under Fastow's guidance made use of SPEs to "park" troubled assets that were falling in value, such as Enron's loss-making overseas energy facilities, and its broadband operation. Thousands of SPEs were used by Enron to conduct business, some of them owned by Fastow himself. As an example of the several dubious accounting practices by Enron, one of these SPEs -- the LJM partnerships, invested in another group of SPEs (known as the Raptor vehicles) to hedge an Enron investment in a bankrupt broadband company, Rhythm NetConnections. Enron issued its common stock in exchange for a note receivable of $1.2 billion for capitalization...
Enron Leadership Enron collapsed very quickly in November 2001, and its failure should have been a warning to serious dysfunctions in the entire corporate and financial system, but this did not happen. Its executives admitted that they had falsified its records going back for at least five years, although in reality they had been doing so since the 1980s. When the company filed Chapter 11 bankruptcy it laid off over 20,000
Enron could engage in their derivative trading strategy with no fear of government intervention because derivative trading was specifically exempted from government regulation. Due in part to a ruling by the Commodity Futures Trading Commission's (CFTC) chairwoman, Wendy Graham, derivatives remained free of regulatory oversight. Ms. Graham, wife of Texas senator Phil Graham, made this ruling 5 weeks before resigning as chairwoman of the CFTC and joining the Enron Board
THE PEOPLE BEHIND THE RISE AND FALL OF ENRON Kenneth Lay being one of the pioneers of Enron from its establishment in 1986, had lead the way of Enron's emergence as one of the leading company in the U.S. And eventually to its collapse and declaration of bankruptcy on December 2001. Kenneth Lay held the position as the CEO and chairman of Enron from 1986 to January 23, 2002. Lay is
Cis.upenn.edu/.../nwlife06.html) One can not begin to trace the various lines and connections of the myriad of relationships, but the chart does fulfill the purpose of showing how much of a web this situation involved. In the wake of the Enron scandal many questions have arisen centering on the strength of the U.S. Economy. Investors have questioned the accounting practices of many other firms; there has been significant fallout on the financial market;
Introduction Enron was one of the biggest business collapses, and one of the most egregious incidents during a period in the early 2000s when investor faith in the securities system was shaken by a series of scandals. The scandals varied in terms of their composition, but behind each of them was greed, the drive by senior management teams to defraud securities regulators and investors for their own gain. This paper will
Analysis of Enron Scandal (2001) Background of the Company All through the course of the late 90s, Enron Corporation was widely acknowledged as one among the pioneering firms in the nation. The new-economy individualist seemed to ditch the mildewed, outdated factories with bulky physical assets, instead favoring e-commerce. While it constantly operated gas lines and constructed power plants, its popularity was owing to its distinctive trading businesses. In addition to the purchase
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