Organizational Behavior

How Enron Failed?

Nicole M. Lee

Leadership 531

Professor Tricia Lara

March 9, 2011

There are a number of businesses started each day of the year. When a busines starts the owner has no prior knowledge if the business will be a success. Tyler Lacoma, a contributing writer for ehow.com states that “approximately 50 percent of businesses fail in the first year.” (How Many New Business Fail in the First Year, Lacoma, and Tyler) Why do businesses fail? There can be numerous reasons. It could be bad management, wrong product or, the economy. In this paper we will look further into how a company such as Enron Failed?

Enron

Enron was formed in 1985 by Kenneth Lay after he merged Houston Natural Gas and InterNorth together. Enron was a publicly traded company where its stock prices had risen to the upper 90’s during 2000. Out all the new business that started up, half of them fail and here Enron started in 1985 and 15 years later had stock prices in the upper 90’s. That should have been a demonstration of how well the company was run by its leaders and management. According to management, the company was stable and compared to the numbers they were doing fine. The company was performing so well even employees acquired stock worth millions. The world learned in 2001, that everything can look good but behind closed doors everything was not good. The finally results was Enron had to close their doors, file bankruptcy and stockholder lost millions. How can a company go from the top to bankruptcy? I say the leaders and managers play a huge role. Kenneth Lay was Enron’s CEO until he hired Jeffery Skilling in February of 2001 to replace him. Skilling was previously Chief Operating Officer and helped build Enron into the powerhouse that it was. Skilling later shocked everyone when he resigned after seven months for personal reasons. According to Kenneth Lay’s response in a Business Week interview, Lay stated “There is no...