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Enron Management Organization

Essay by   •  February 24, 2013  •  Case Study  •  1,053 Words (5 Pages)  •  1,183 Views

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Management Organization

In any business, leadership management's responsibility is to provide a safe and comfortable working environment, using appropriate communication skills, operating with the highest possible ethical standards, being fair, provide compensation to the employees increasing motivation for the employees to work at his or her fullest potential. This paper will discuss Enron, and the business failure that occurred. At one time, Enron was one of the largest energy providers in America, based out of Houston, Texas. This paper will explain how specific organizational behavior theories could have predicted Enron's failure. Also provide a comparison and contrast how leadership management and organizational structures contributed to the failure.

Enron History

Enron was founded in 1985 by Kenneth Lay. Enron was formed by Mr. Lay" merging together his company, Houston Natural Gas, with Omaha, Nebraska's InterNorth" (Reeher, 2013). Enron, with Mr. Lay as CEO, became highly profitable through further diversifying and expanding its assets such as electricity plants, paper and pulp plants, gas pipelines, and other services.

During the 1990's, Enron enjoyed a solid reputation for "old economy stability. Enron entered into the Internet. At its peak, Enron was worth about $70 billion and its shares were trading for about $90 each. Later the company stated that they had misstated its income, it was a couple of billion dollars less than what the balance sheet stated.

Enron Scandal

During 2001, a series of revelations involving irregular accounting procedures bordering on fraud became public knowledge. Enron and its accounting company, Arthur Anderson, became center of a scandal. Due to a lack of revenue, Enron was forced to access a line of credit for $3 billion, downgrading the company's debt rating. Due to this, Enron's creditors feared that payment would not be made, decided to increase Enron's payment schedules. On December 2, 2001, Enron was forced to file for bankruptcy, lying off thousands of employees.

Due to Enron having to file for bankruptcy, it became known that millions of debt had been hidden in Enron's partnership companies. March 2002, Arthur Anderson would be indicted by the U.S. Justice Department for destroying documents of Enron's malfeasance, and the accounting firm was convicted later that same year.

Examining Enron's Failure

At that time, natural gas as well as energy production was a government sanctioned monopoly. The government had regulated the constitution of power plants, the rates to be charged for power, and the maximum profits that energy companies are able to earn, but that was about to change. Everything changed once the federal government had deregulated the natural gas industry in the late 1980s and the electricity industry in the 1990s. December, 2001, Enron Corporation collapsed as a result of a fraud committed by Kenneth Lay, founder and CEO of the company. He was accused of manipulating financial statements reporting false and misleading information and omitting facts necessary to provide accurate financial results for nearly five years. While Enron's managers escaped with approximately $67 million and thousands of Enron's workers lost their jobs and a high

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