Enron

Seminar In Business Management

Class: September 20

Subject: Enron- The smartest guys in the room

Enron was one of the world’s leading electricity, natural gas, communications, and financial commodity company before it went bankrupt in 2001. Enron first began its root in natural gas and energy related business. During its later period of operation, led by Ken Lay (chairman) and Jeff Skilling (CEO), financial commodity transactions business became a major part of the company’s operating activity. They focused on the earning derived from the transactions based on future oil price, gas price, and even weather. In order to meet its revenue target and maintain its stock price, the management of Enron’s deliberately adopted a false accounting method (called “mark to market accounting”, invented by Jeff Skilling) and other fraudulent activity to make Enron looked profitable. The management knew that the real operating results was not as good as it seemed, and Enron was even actually in debt, but they kept on hiding the truth by providing misleading financial statements and maintaining a promising public image. At the end, the conspiracy of the management couldn’t cover the financial black hole of the company anymore. Enron went bankrupt, causing thousands of people jobless and facing tremendous equity impairment because of their investment on Enron’s stock.

I think that Enron’s case was a tragedy. People who suffered the most were the basic level employees who worked hard but ended up losing everything they had. Many of them were encouraged to invest their money in the pension trust that was based on Enron’s stock. On the other hand, the management level benefitted themselves not only from huge amount of bonus but also from conducting insider trading. They sold a lot of Enron’s stock on hand before the stock price collapsed. Even though most of the people who conducted the crime were sentenced to jail, having their proceeds of crime returned, that...