Free Enron Corporation Essay Sample
Enron Corporation was started by Kenneth Lay after merging two natural gas pipelines namely, Houston natural gas and InterNorth. By 1992, Enron was the leading seller of Natural gas in North America. Enron was later to be involved in wrong organizational behavior that led to its failure. In this paper, I intend to highlight the major causes of the failure of Enron Corporation.
Business Concepts Applied
Enron applied the concepts of ideology and hegemony to maintain it's status in the business world. As the Corporation went on to be declared bankrupt, they still appeared to doing exceptionally well financially. They hired traders who were trading with oil illegally. They maintained immense profits. The founder of the Corporation knew of their illegal trade but kept on encouraging them to continue making the millions. Many of these projects were never completed. This made Enron seem like a highly successful business while it was not. The new CEO formed a review committee that graded employees from time to time. The ones at the lower level were fired. Employees who would question the dealings were fired immediately and replaced. This brutality inflicted fear to the remaining employees.
Enron Corporation covered its grim financial position in many instances. They had devised methods to cover that up that such as a mark to market accounting. This was initiated by Skilling immediately he became the CEO of Enron Corporation. This mode of accounting involves a process where once a long-term deal was signed; income was calculated at the present value of future cash flow. Profits were calculated long before projects were completed. Most of these projects were not completed. This however, did not reflect in the accounting of Enron. Enron was also fast at canceling projects and recording that as assets for the Corporation. Enron was involved in many unscrupulous dealings including one of White wing. Enron agreed to sell its Assets to the Company. Once the transfers were approved, it was realized that the agreement made the assets a loan and not sales. The assets included gas pipelines, electricity plants and broadband all over the World. The Culture of money laundering, fraud and illegal deals became a norm at Enron Corporation. Enron did not produce its balance sheet together with earnings statement. Skilling when asked to produce them by his competitors, he would become exceedingly angry and even call names anyone who dared to ask him
Un ethical Approach
The CEO later hired two new lieutenants who would assist him in application of his directives. They were referred to as “guys with spikes”. The two misused the shareholder's funds to have fun in sheer unethical ways. They did not have a professional approach at work. They brought to the office female strippers whom they had drinks with in the office. One of the lieutenants later resigned abruptly leaving a significant financial gap after he was paid his shares. Enron covered about this by enrolling a public relations campaign team. The team tried to cover its financial loses. The worst hit was the Dabhol Power Plant based in India. Enron had invested in the plant even to defy the believe of the other Corporation who believed investing in India was a dreadful idea. It lost 1 billion dollars after finally giving up because of major losses. Enron also invested in broadband technology. This was meant to produce movies on demand. This initiative also failed but Enron used a method of accounting known as mark to market. He was able to record fake profits from this initiative.
Enron Corporation applied organizational communication methods that were essential. The three methods are the formal and the informal communication and the upward approaches. The informal is between managers of the same level. The formal also known as the Top-Down approach involves the Top level managers communicate with the ones at the lower level. The upward approach is between employees of a lower rank communicating with a senior. This however, was not applied well at Enron. It was practiced because the employees were graded.
The Cultural Approach to Organizational communication was well practiced at Enron Corporation. Cultural approach involves enforcing values in a Corporation that employees share and adapt to. This approach is exceedingly difficult to change because people working together are slowly adapted to it. It gets into the system, and anybody who joins the Corporation, quickly adapts to it.
In conclusion, the Rise and Fall of Enron Corporation is seen as an occurrence that would have been avoided if ethical business practices were enforced. The auditors were not keen even so as to detect the mismanagement of funds. Enron was declared bankrupt in November 2001. This was caused by massive debts that it had incurred.