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Business Failure Paper

921 words - 4 pages

IntroductionIn it's hey day, Enron, was the worlds top electrical, communications, pulp and paper, and natural gas company. Unfortunately, in late 2001 the company started to unravel. Enron was on the brink of bankruptcy and even an attempt to be bought out by a smaller company called Dynegy, could not save Enron. The company was in financial ruin as their stocks dropped from over 90.00 dollars to practically nothing. A scandal was revealed that involved the companies own accounting firm, Arthur Anderson, and Enron. It was discovered that in 1990 accounting procedures were irregular, which included stock prices being manipulated. Looking into the background of Enron's troubles, leadership and management issues were a part of this scandal. This paper will identify the failures of the management and leadership of this company, how correct and positive organizational behavior and leadership of the management team would have effected the configuration of the now disgraced company. (Chron.com, 2009)Enron's Failure as a CompanyThe team of executives at Enron wanted to establish a company that would raise funds for the shareholders. In spite of this, the discovery of lower stock prices made the team take aggressive measures towards their accounting methods. In order to make the companies shares more pleasing, the team of executives counted on a boost of new capital funds and at the same time, cover up any risk to new backers. After Enron started the new accounting process, the necessity to continue the scam amplified with each financial year. Regardless, the company wanted to keep advancing forward. (TIME Magazine, 2009)The Failure of the Companies LeadershipDuring the duration of Enron, the corporation's governance did not implement their responsibilities. The Audit Committee should have been judgmental on the work of the auditors, but due to the continued increase in stock earnings, the call for an investigation within Enron's accounting practices were not founded. The Board was lenient with supervising management and accepted information from the executive team at face value. The Board was content with Enron's success. (TIME Magazine, 2009)The Failure of the Companies ManagementUnfortunately, the employees of Enron were caught up in the downfall of the company and suffered also. The corporation had over 100 employees in the accounting and legal staff. It appeared that all employees were working with support of the managing team, which in turn was backed by the executives. As with management and leadership, the methods that the employees used were not in doubt because incentives were high. Employees were receiving big salaries which were helping to hide the big corporate debt and increase any earnings reported. The employees were behind the company and did not cause any problems regarding the methods that were being used. (CNN Money.com, 2009)Corporate Structure and Enron's ImpactCustomarily, with some state law restrictions, the structure of...

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