Running head: EXAMINING A BUSINESS FAILURE - ENRON
Examining a Business Failure - Enron
Examining a Business Failure - Enron
This company had it all; the soaring stock prices, the corporate sponsorship of a Major League Baseball field, and the support of President George W. Bush. What once seemed like an unstoppable corporate giant came crashing down in the early part of this century. Enron has likely been the most discussed corporate failure of the decade, and there is a lot of intrigue and questions as to why Enron
failed. The problems with Enron began long before their stock plummeted and the ensuing bankruptcy.
Enron was formed with the merger of Houston Natural Gas and Internorth by Kenneth Lay. A few years later, Jeffrey Skilling was hired as CEO. During this time, Skilling was responsible for bringing aboard his executives. These executives, along with Skilling were able to find loopholes in the reporting of financial information. They were also able to hide the losses of billions of dollars from failed business ventures and investments. More importantly, they were able to hide these discretions from the board of directors and the audit committee. The successes or failures of an organization begin at the top. A company whose stock once sold for $90 a share in mid-2000 had dropped to below $1 a little over a year later. It was at this time the Enron scandal became known to the public.
Enron placed a high emphasis on their stock price, as well as short-term sales. They disregarded the need to build long-term relationships with their clients. Enron also gave out bonuses for the short-term sales, which may have contributed to the lack of effort on the part of their employees to secure long-term investments. Enron's organization behavior theory focused strictly on costs. This theory, along with their executives' extravagant spending contributed to the downfall of Enron. "In 1998, the top 200 highest-paid employees earned $193...