Analysing Enron Trading Group - Case Study Example

Name: Instructor: Course: Date: Introduction In the United States of America history, there has never been witnessed another scandal like the one discovered from Enron. Although this company had been doing fairly well since its inception in 1985, it was later understood that it had been feeding false data to the public in respect to its fiscal condition. This was a crisp contrast to the company’s ethics code that was grounded in the values of respect, communication, integrity and excellence. It is worth realizing that the survival of a company depends on the leadership style employed in its governance. If the senior leadership team becomes greedy and corrupt, it is possible for a company to grind to a standstill regardless of its previous performances. The prevailing culture of Enron and the subculture of Enron’s trading group Many people perceive Enron as having an arrogant-like culture mainly because their activities fooled people into believing that, the company was in a position of handling greater risk without any unforeseeable danger. However, this was never the case as the company was engaging in improper actions. The company could get to all extremes to make sure it made more money. This culture of arrogance is exhibited by the company’s policy of decentralization whereas it did not have enough money to fund such. In addition, Enron had a plan that moved people to increase the value of contracts, and also encourage them to use illegal accounting practices. Corruption is a culture that was predominant in this society. The company’s top management was willing to spend huge chunks of money to make sure that its malpractices went undetected. The failure of Enron is as a consequence of a few bad men. It is evident that the senior people in the company are squarely to blame for Enron’s failure. These people employed accounting tricks that showed a favorable portfolio. As a result, the ethical principles the company stood for were quickly eroded, leading to the sprouting of unethical codes of conducts amongst senior members of the company. Zack argues that the company was reporting earnings from other quarters in an endeavor to preserve the value of their shares in the stock market upward (33). The management was afraid that investors would sell their shares if they realized the company was in financial crisis. These deeds are alleged to have spread to other employees in the company resulting in the prostration of the company. According to Skilling, money is the only thing that motivates people. Most of the citizenry in the contemporary world do what they do best because they are guaranteed of making money. This means that money is the propelling element. As a consequence, everyone works hard to obtain such rewards. In many countries of the world, there have been numerous strikes by employees demanding for a better pay from their employers. For these kinds of people, money is the only affair that can tempt them in whatever they are going on. On the other hand, there are people who do not perceive money as a source of motivation. In the modern day world, there are many charitable organizations that assist people with different needs. Such people are willing to go beyond the call of duty to ensure that people with different needs are attended to. Such people or organizations depend on well-wishers to fund their course. This means that even with meager resources, they are invariably ready to add a helping hand to the destitute. Performance review contracts were instituted by Skilling as a means of ranking employees in the United States. The performance review contracts had been developed to conform to Enron’s respect, integrity communication and excellent values. Many people perceived this as an effort to make them work hard for the welfare of the company. In order to be rated and ranked higher, employees embarked on all manner of ways to help the company make money. Each employee was required to post their earnings in the company’s organization. In other language, critics of this idea looked at it as an attack to dismiss employees. It was pronounced that those whose rating was five were discharged within the first six months of the introduction of the performance review contracts. As a consequence, it was labelled as rank and yank. The fact that the company did not care how the employees brought in revenue to the company makes the performance review contract a bad idea to any institution. This thought brought about a lot of secrecy of the company’s trading contracts and other revelations. Pump and dump was an idea from the senior figures in the company to manipulate the value of their shares in the stock market. During this period, such people would sell their shares and then the cost falls. As an outcome, shareholders lose their money because of speculative buying. This act is unethical in the stock market and in the country at large because, it makes investors lose confidence in the stock markets, hence affecting the growth of the economy in the long run. Arthur Andersen was both the financial consultants and auditors of the Enron’s Company. This means that Arthur Andersen was both in the management of the company and was also the auditors. As an auditor, Arthur Andersen has to make sure that the accounts of the company reflected progress and growth. In ordination to accomplish this, the company had to balance the two social occasions which brought about conflict of interest. Enron should have outsourced the services of another company which would be their financial consultant or auditors. In other words, one company should not have been caved in two characters as they bring about conflict of interest. When Bethany McLean had an interview with Jeff Skilling, he told her that he was not the accountant to respond to her inquiries. In addition, Jeff Skilling bullied her out of the interview. I think this was not a tactic because the company had been involved in many dealings, some of whom he could not remember. This explains that he was running an organization until now he did not have an estimate of what they owned as a fellowship. This documentary illustrates that for a successful company to hold out; it should have strong policies, and work ethics that are adhered to all the times. Secondly, employees should be encouraged to describe any actions that they might think is wanting. This will help in dealing with the problem early in order to prevent it from spreading further. In other words, every employee has a role to play in the management of the company in spite of their positions. Conclusion Managing a company requires a dedicated staff that is willing to go beyond the call of duty to fulfil the company’s mandate. The employees should strive to stick to the company’s vision and mission in order to make sure that they achieve what the company envisages to do. Enron Company was one of the largest corporations in the world, prior to its collapse. However, due to mismanagement by greedy and corrupt individuals, the company collapsed leading to the loss of jobs by many people in the United States of America. It is also the responsibility of the government, through the relevant agencies, to keep monitoring the activities of all companies within their jurisdiction. Moreover, auditing of such firms should be done by accredited firms that have no vested interest in the company being audited. This will eliminate cases of conflict of interest as witnessed in Enron’s company. Work Cited Zack, Michael. Fair Value Accounting Fraud: New Global Risks and Detection Techniques. New Jersey: John Wiley & Sons. 2009. Read More