Case Study: Enron

Once ranked among the best companies, the Enron Corporation declared itself to be in the state of bankruptcy after a series of fraudulent movements and falsification of financial reports. In the following essay we will go over the factors that contributed to the company’s abrupt decline.

From its beginning stages, Enron was known for pushing employees to the maximum and ranking them according to their contributions, therefore creating a fierce environment where breaking the rules was acceptable. To the company it was not about making profit for the shareholders but rather making money for executives and employees, this way every employee worked their hardest to get to a better financial position by means of breaking rules and taking behavioral risks.

The Chief Financial Officer of Enron,

Andrew Fastow, was one of the biggest contributors to the financial problems and decline of the company. He confessed to conspiring against Enron by hiding their debt and inflating their profit, at the same time he made millions for himself. Fastow also participated in partnerships that made Enron’s profit seem bigger than what it was and got him kickbacks that he disguised as gifts to retain the money.

Although Fastow claims that all his worked was supervised and applauded by the directors and CEO of Enron, the company’s chairman Kenneth Lay stated that prior to Fastow’s hiring he did not seem to have any ethical flaws and was surprised when his frauds were discovered.

Enron’s auditor Arthur Andersen also took part in the falsification of the company’s financial statements, making it possible for potential investors to invest on Enron because of its supposed financial stability. The company’s law firm, Vinson & Elkins, is believed to have structured some of Enron’s partnerships and supported their illegal deals that otherwise could not be done, just like the Merrill Lynch firm went on with a deal that helped falsify financial reports.

There were many factors...