Enron Corporation - Assignment Example

Its CEO Ken Lay was one of President George W. Bush’s personal friends. Both Ken Lay and CFO Jeff Skilling and later Andrew Fastow were regarded as leaders to emulate. Smart, suave and ambitious, they were regarded as the embodiment of corporate success. But a series of events quickly turned the tables on the fortunes of this billion dollar company and its management. In fact, even its auditors Arthur Andersen were considered culpable and not only removed as incompetent, but the fallout of the entire debacle caused them to close down their businesses all across the world.

In hindsight and as a result of investigations, it was determined that there were a number of reasons behind the inglorious fall and demise of this once great enterprise. Notwithstanding the obvious reasons why the CEO, CFO and some other heads of business departments worked in unison to give a highly false and misleading picture to corporate America and the public at large, it seems that they surely thought they were the smartest guys in the room and could continue to hoodwink the masses with false notions of success.

Was It a Question of Structure? The puzzling fact is that why did it take so long for the facts to unravel and the truth to reveal itself. With a corporation the size of Enron, and its business interests spread all over the world, it seems amazing that the real state of affairs was kept out of the eyes of employees, what to say of the general public. Did the reporting structure have something to do with it? Auditors combing through the records of the failed corporation have noticed that the scale of the accounting fraud was widespread and resonated throughout most of the corporation.

This included false and creative reporting, misclassification of assets and liabilities and other such manipulations. In fact right from 1997 till its demise, Enron top executives were concerned with over-reporting profits and revenues and understating liabilities and expenses to present an incorrect picture of success to the world (Maclean & Elkind, 2003). So the whole edifice was crumbling and it was a case of rampant and collusive corruption and misreporting at almost all levels. The matrix reporting structure, where one reports to a direct supervisor as well as a regional head elsewhere is suggested as a good dual reporting mechanism to prevent irregularities.

Was it a Question of Exceeding One’s Scope of Authority? Another reason that has been pointed out as the cause of the demise of Enron was that executives tended to exceed their limits or boundaries of authority. In fact, Ken Lay has claimed that he sometimes did not know exactly what Skilling and Fastow were doing in terms of coking up the books and presenting a false picture to investors and the general public. But the fact remains that authority and responsibility cannot be separated. Ken Lay as CEO must be held criminally liable for the doings of his CFOs as it was he who directed them to get the results that were shown on the books.

So, even this argument does not hold weight. Executives are responsible for their own actions and directives, no matter what the chain of command. Was it a Question of Corporate Culture? Another excuse or reason pointed for the collapse of Enron was that it was due to the corporate culture of success that the executives had created over the years. Enron had earned a name for itself under Lay, and he wanted to remain