NOTE: Free essay sample provided on this page should be used for references or sample purposes only. The sample essay is available to anyone, so any direct quoting without mentioning the source will be considered plagiarism by schools, colleges and universities that use plagiarism detection software. To get a completely brand-new, plagiarism-free essay, please use our essay writing service.
One click instant price quote
o It must be very significant for a company the size of Enron to lose $ 50 billion in market capital over a period of ten months. It is also significant that a company of this stature can get away from their auditors and shareholders without anyone noticing that there is something seriously wrong. How is it possible that bankers, stock analysts, auditors and Enron's own board failed to comprehend the risks involved in this trading giant's methods. To blame Skilling; the president and COO of Enron since 1997, is also surprisingly.
Why will a person build a company to a $ 50 billion giant based on lies and betrayal? If it was not significant enough to be America's seventh-largest corporation, Enron has ties to both the ruling and opposing political parties in America. The involvement of senators from the Republican and Democratic Party plays a role in Enron's failure. They were the people that turned a blind eye on Enron's troubles before the firm's bankruptcy. If they have spoken out sooner about what they knew, some investors could have been more careful. Enron's financial contributions to the Bush campaign and the Republican Party kept them from protecting Enron's employees and investors.
If you look at the top management of Enron it looks like they were hiding their ideas and risks from each other without noticing that the company was on a downward path. Enron failure came as a surprise to everyone. If a company of this stature can fail to be successful how transparent were they actually. It is important that the rest of the world take notice of these happenings.
No company can be cheating at the top, and get away with it forever. If any company do not make use of proper market research, you and bound to fail. Enron failed for a number of reasons. Enron's top management was in competition with each other, keeping everything secret. Arrogant is the word associated with Enron if you look at there web-page (enron. com).
In Enron's lobby a banner with attitude spells out "the worlds leading company": Greed was evident from the start of the company, and the culture were talked about how much money they would make. Compensation plans were used to enrich the executives rather to generate profits for shareholders. In Enron's energy services division, which managed the energy needs of the large companies like Eli Lilly, executives were compensated on a market valuation formula that relied on internal estimates. As a result the contracts were inflated, even though it had no impact on the actual cash that was generated. Enron thought they were leading the revolution, and therefore thought they could bend the rules to suite their needs. Skilling was a very difficult person to work for, and demanded respect and loyalty towards Enron.
I think that the people were to involve in their own projects to notice the failure of their smaller ventures. For every new venture that was started, capital was collected from investors. Everybody was under the impression that there core energy business very thriving. While energy were a fast growing business, the market tends to mature, and therefore bringing the profit margins down. Once that growth slowed, there other weakness becomes more apparent. The risk controls were overlooked and didn't apply to all the sectors of the company.
Skilling were under pressure to keep expanding to new markets, to be able to finance his bigger growth plan and not loose the company's critical investment grade credit levels. Skilling were forced to keep the investors happy and make sure they don't flee. The off-balance sheets became more and more complicated and risky. Some deals were very suspect and were called like Osprey, Whitewing and Marlin and were revealed in Enron's financial fillings The investors keep on investing in Enron because there financial statements prove to be a safe investment. Enron required more and more partnerships and investors for there projects.
Enron were trying to do too much, too fast, with a possibility of little or no return. Some partnerships required from Enron to replace stock if their ratings and stock price fell below a certain point. Enron ended up with a $ 4 billion dept. While Enron's stock and values were falling, the cracks in Enron's financial and profits were exposed, and started to chase away new investors and lenders. Enron's core business were neglected to rectify for the failures in other ventures or markets. They invested $ 1. 2 billion in fiber-optic capacity and trading facilities, but ended up in failure when the broadband market crashed.
Some markets failed to improve and generate profits, as the markets in which they invested as there core business, such as energy trading and metals. Skilling were always looking for new markets to compensate for the competition in the energy trading. There policy involvement prove to be successful because they were loved by everyone involved with Enron. The political leaders failed to question the credibility of Enron, and were to happy with the cash they received for their campaigning.
With politicians from Colorado to Washington admitting they were beneficiaries of Enron, it is clear of the companies influence. While Enron's auditor Arthur Anderson failed to speak out before the fall, they are now blamed for not playing to the rules. Enron are saying that Arthur Anderson approved all their moves. A former employee says that Skilling and his circle refused to detail the return on capital that the trading business generated, instead pointing to reported earnings. Kenneth Lay, former chairman and chief executive of Enron, sold shares in the bankrupt energy-trading group, after being warned by a senior colleague that it could face collapse because of its off-balance-sheet transactions.
When all eyes were focused on Enron for answers, the company destroyed some of the most important documents needed for the solving of the puzzle. With most people unsure of the other reasons of Enron's fall, the most fingers point to top and middle management. o The impact of Enron's failure will have an effect on all business with regarding their transparency and Management operations. Any company smaller than Enron can see that creed, arrogance and uncertainty can create doubt in the mind of investors. Enron's failure to secure a consistent flow of income in their core business proves to be the main factor of their dismay.
Management that withholds information from their colleges and peers to gain power and enrich themselves prove to be devastating. Any company looking at the mistakes of Enron will see the definite line of moving money around to cover their tracks and therefore there need for more investments to provide for there operational failures. The impact will also create doubt and uncertainty under all investors worldwide, and force them to rethink their investments in new and unsure markets. The effect on J. P. Morgan Chase & Co.
is said that losses of $ 456 million related to the beleaguered energy trader were recorded. The Bank of New York could stand to lose $ 100 million or more. The Bank of New York could stand to lose $ 100 million or more. A estimate of $ 20 billion or more on bad loans, trading deals and other transactions could follow the result of Enron's bankruptcy filing.
Thousands of Enron's employees have invested in Enron stock that the company encourages them to buy, but barred them from selling as the value plummeted. They have lost their retirement savings. There will also be an effect on the account industry, as lawmakers probe Arthur Andersen's failure to inform the Securities and Exchange Commission that Enron was in trouble. Enron paid Andersen at least $ 27 million for consulting and $ 25 million for auditing. In April last year energy wholesalers, witch include Enron, had overcharge the state with $ 124 million.
This my result in strict and proper measures for all companies doing business with the State. o Lessons learned from the Enron failure? Work closely with your management team, and ensure that proper communication takes place. As manager you must motivate your team and resolve any conflict that can have negative effects. Make sure of the controls and systems used in your company are sound and safe. Work effective on your core business, and make sure that you don't waste time on unimportant issues.
Plan carefully on new projects and ensure that investors are fully aware of the risks involve.
Free research essays on topics related to: 100 million, top management, arthur anderson, 50 billion, enron
Research essay sample on Arthur Anderson Top Management
