The Enron Scandal
In 1985 Kenneth Lay formed an American Energy company called Enron, by merging Houston Natural Gas and Internorth. Along with CEO, Jeff Skilling, Enron became the largest seller of natural gas in North America by 1992 and from 1996 to 2001 ???America??™s Most Innovative Company???. All that came to an end around 2006 when Enron was accused of company fraud and improper accounting practices. Senior executives stole over 68 billion dollars from nearly 24,000 employees and thousands of investors.
In order to avoid such activities Enron could have been structured in many different ways. One thing that could have been done was implementing a code of conduct and strictly enforcing it, starting all the way up to the big wigs. It should be necessary for independent companies to overlook the finances and books for businesses, especially large ones. There should also have been some requirement, to have all financial statements presented to the interested ???POOL OF PEOPLE.??? The company has a fiduciary duty to their employees, customers, stakeholders, etc. Also employees should have somewhere to go or call, where they feel comfortable to report suspicious activity anonymously, to an outside entity.
Enron??™s officers were definitely not acting within the scope of their authority. Enron??™s officers are there to make sure the employees are following company rules and so it requires officer??™s to follow the rules of the law. Falsifying documentation and following unlawful practices is certainly not within their scope of authority.
I feel corporate culture would be envisioned and created by the founder and top executives of a company. Usually corporate culture within a business is a reflection of the personality who is running the business. In Enron??™s case, CEO Jeff Skilling, was a greedy and arrogant man which created an aggressive and brutal corporate culture. He implemented a PRC (perform review committee) process which fired the bottom 15% of employees ???deemed unsuitable??? every year. This also created a very competitive corporate culture.
Enron had many irregularities in their actions, which led to their downfall. One irregularity discovered, was that Enron??™s recorded assets and profits were overstated or fraudulent and unreal. Losses and unbeneficial companies were not included in the financial statements. Another irregularity in the actions was recognized by Andrew Faston (CFO), when he established numerous special purpose entities to set liabilities on them and not Enron.
As I stated before, employees and the work environment are, most of the time, a reflection of the managers vision and attitude toward their company or department. If an owner is corrupt, usually the business and employees will not be working by the books. If a company envisions a trustworthy company, they will most likely have more policies and procedures implemented than the unlawful business. Employees are usually more honest and careful when working in such an environment. So is Enron liable for the actions of its agents and employees That is a definite yes. Enron must foresee everything that goes on within its company and take corrective measures if needed.
* Ackman, D. (2002). Enron The Incredible. Retrieved from http://www.forbes.com/2002/01/15/0115enron.html
* Wikipedia. (2011). Enron. Retrieved from http://en.wikipedia.org/wiki/Enron
* Wikipedia. (2011). Enron Scandal. Retrieved from http://en.wikipedia.org/wiki/Enron_scandal
* Bloomberg Businessweek. (2001). The Fall of Enron. Retrieved from http://www.businessweek.com/magazine/content/01_51/b3762001.htm