Enron

Enron emerged as one of the worlds leading companies in electricity, paper and pulp, natural gas, and communications claiming revenues nearly $101 billion in 2000. Fortune magazine named Enron as “most innovative” company for 6 years in a row. Enron peaked in 2001 but began to decline in 2001. According to Microsoft Encarta Online Encyclopedia (2009), Enron canceled its deal with blockbuster to provide movies over the internet in March 2001 and in April claiming the company was owed more than $500 million by bankrupt California energy companies. The CEO, John Skilling then resigned in August and reported a 3rd quarter loss of $618 million. The following day after reporting a loss, Enron announced an accounting error which overstated Enron’s net worth by over $1 billion. This caused multiple investors to sell its shares causing stock prices to plummet.

By December 2001, Enron filed for chapter 11 bankruptcy. One must look at the CEO and other top managers who were in charge as to the cause of this bankruptcy. The company had offshore accounts to hide losses which were not reported on financial statements. By hiding losses, Enron was able to inflate numbers and assets which were non-existent. The actions created leave one to question leadership and management skills. The lack of leadership and organizational behavior by executives caused the downfall of Enron.

Top executives are paid top dollar to provide leadership and knowledge to direct the company toward success. Why did Skilling fail? Sydney Finkelstein (2004) states “Standard explanations of why executives fail are clearly insufficient. Understanding why smart executives fail would be much easier if we could rely on these explanations but we can’t.” Most companies fail during 4 phases of business. The 4 phases of business include new ventures, dealing with innovation and change, managing mergers and acquisitions, and addressing new competitive pressures (Finkelstein, 2004). Failure at Enron...