The Collapse of Enron Essay Sample

1. Who were the stakeholders involved in. or affected by. the prostration of Enron? All stakeholders were. evidently. affected by the prostration of Enron. However. several of them were critical. particularly those being considered as market stakeholders such as providers. creditors. employees. and shareholders. These mentioned stakeholders seem to be Enron’s most recognizable as the indispensable subscribers to its organisation. They dared of giving up an available option in order to take a hazard with Enron in hoping of some benefits in return. But one time its bankruptcy has happened. these mentioned stakeholders were in a terrible instance. For case. its employees would lose their occupation and became unemployed. this. in bend. could finally consequence on Enron’s non-market stakeholders in term of unemployment rate. Its creditors and providers would besides see a immense depressed from their balance sheets. In the instance of creditors. a big amount of money would be gone. both rule and involvement that they could hold gained. This same state of affairs would besides go on to Enron’s shareholders. all their investings would non return any individual spots as dividends. However. Enron was an energy industry. due to its bankruptcy ; a better environment could be seen. this positively affected the local communities.

2. Sing all facets of the instance. what factor or factors do you believe most contributed to the prostration of Enron? The prostration had many causes. Enron made failed investings in fiberoptic webs. a power works in India. and H2O distribution in the U. K. Top executives in the company are accused of unethical behaviour. The SEC is look intoing fly-by-night trades in which they allegedly enriched themselves. and formed partnerships designed to conceal $ 500 million in losingss. These are serious jobs. but corporations have survived worse. and Enron could hold been fixed with new direction committed to reform. The fatal blow was the prostration in the monetary value of energy and the sudden terminal of the California energy crisis. which drained hard currency and ruined Enron’s recognition. Enron was chiefly a trading company. a concern that depends on good recognition and client assurance.

3. What stairss should be taken now by corporate directors. stakeholders. and policy shapers to forestall a similar event from happening in the hereafter? Corporate directors should develop their moral leading accomplishments. Moral leading seems chiefly a witting undertaking in which the leader needs to see the emerging state of affairss and make up one’s mind on a response that best caters toward overall moral development. Unconscious schemes – such as Lay’s temperaments to behavior arising from his spiritual values – may keep back the leader from such witting thought. Consequently. systems believing may go replaced with behavior that does non needfully advance coherency in overall moral values. Therefore. in order for leaders to develop their moral leading they need to larn to place mental theoretical accounts that are keeping them back from systems believing. For illustration for Lay it would hold been necessary to recognize how his local involvement in the wellbeing of his followings was making pandemonium overall. In this regard. it seems of import for leaders to actively develop schemes that identify values and experience that maintain them from perpetrating to systemic aims. There are besides several stairss the authorities should take to forestall future dirts: Bar hearer struggles.

The large auditing houses already have promised major alterations in the manner they do concern. Most will no longer move as internal and external hearers for the same house. Two of the three major accounting houses that still act as advisers will no longer sell many of those services to the same companies they audit. Puting distance between comptrollers and the companies they audit should increase public assurance in the auditors’ judgements. Those limitations should be imposed by the authorities and monitored by the U. S. Securities and Exchange Commission. Former SEC president Arthur Levitt attempted to ordain such reforms but was rebuffed by the industry’s strong lobbying attempts in Washington. Increase revelation.

The public needs more information about the fiscal relationships of executives and board members of publically traded companies. Do executives have investings in corporate subordinates? Do board members have outside occupations with groups financed by the company? Are fiscal ties allowed to be between board members. executives and employees? One job found by the Enron board was that many in a place to blow the whistling were seemingly compromised by their ain sweetie trades. Tighten moralss regulations.

Disclosure aside. companies need to construct higher walls between their boards and senior direction. In Enron’s instance. the board’s ain fact-finding panel faulted managers for non making their occupation. While some information was kept from the board. the controls over direction “were non equal. and they were non adequately implemented. ” the board’s fact-finding panel found. Even the best organisational cheques mean nil if board members lack the accomplishments. clip or independency to make their occupation. As Arthur Andersen. Enron’s former hearer. showed. comptrollers can non be left as the concluding catcher. Set new criterions.

The accounting industry’s pattern of self-policing should be ceded to the SEC. The public involvement in the unity of the markets is clear. Enron besides exposed a cardinal failing in accounting criterions ; one thought proposed by reformists is a procedure whereby hearers could alarm the puting populace to companies that push the accounting envelope. Tougher behavior codifications besides should use to stock analysts and investing agents. The disposal and Congress besides are sing a scope of ways to protect little investors whose portfolios are dominated by an single stock. That could hold blunted the losingss of Enron employees who had company stock in their retirement program. Another thought is to make a fund to reimburse stockholders who fall victim to corporate fraudulence. Besides. more ordinance surely is needed of the energy hereafters merchandising concern. Sure. kicking around Ken Lay and other former Enron executives may fulfill the blood lecherousness back at place. but where was the concern in Congress for these reforms when Enron was flush a twelvemonth or two ago? The public doesn’t demand politicians to add to the heat. Alternatively. it needs a clear. detailed and feasible program for forestalling this from go oning once more.