Examining a Business Failure

Examining a Business Failure

Mariela Quinones

LDR/531

Monday, May 17, 2010

Leo Maganares

Abstract

The purpose of this assignment is to research about a failure within a large organization and describe how Organizational Behavior theories could explain or predict the failure of management. The paper will compare and contrast management failures with leadership failures that could have occurred, and will determine the impact of the company’s structure.

Examining a Business Failure

Enron Corporation, an American energy company based in Houston, Texas, and one of the largest bankruptcy and biggest audit failure in American history. Enron was formed in 1985, and several years later a staff of executives was developed to use accounting loopholes, special purpose entities, and poor financial reporting to hide billions in debt from failed deals and projects. The Chief Financial Officer and other executives were able to misled Enron’s board of directors and audit committee of high-risk accounting issues. Enron’s stakeholders lost nearly $11 billion when the stock price went from $90 to less than $1 by the end of 2001. Enron’s filed for bankruptcy on December 2, 2001 under Chapter 11 of the United Sates Bankruptcy Code. Many executives at Enron were indicted for a variety of charges and were later sentenced to prison. Employees and shareholders received limited returns in lawsuits, despite losing billions in pensions and stock prices. As a consequence of the scandal, new regulations and legislation were enacted to expand the reliability of financial reporting for public companies (Dharan & Bufkins, 2004).

Enron Failures

The success of an organization lies in the collective efforts and smart decisions made by important employees. Enron failures brought thousands of jobs lost, billions of dollars erased, pensions gone, and a dream shattered by scandal and fraud. Enron tried hard to hide the company’s true financial condition covering loses and...