Eron Analysis Essay

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Politics without principle. One reason that the executives of Enron expected to be able to shield their shenanigans from the world was based upon the political connections they had deliberately made. Ken Lay visited with Vice President Cheney and other energy policy officials many times, starting as far back as 2001. In October and November of that year, Lay made several phone calls to Federal Reserve Chairman Alan Greenspan, Commerce Secretary Donald Evans, and Treasury Secretary Paul O'Neill, asking for help. This sort of lobbying behavior represents a strong conflict of interest. A way to mitigate this problem going forward would involve sponsoring legislation for campaign finance reform, so that elected officials do not find themselves "owing favors" to big contributors.
Wealth without work. From the top down through the ranks, Enron's very corporate culture fostered the desire for wealth without work. To an outside observer, Enron seemed to exhibit the characteristics of a market culture, one with strong external focus that values stability and control. This sort of culture is driven by competition, primarily emphasizing targets and results; profits remain the first priority above all else. Enron's market culture was taken to such an extreme that making a profit was more important than any ethical consideration. At Enron, while some work was indeed required, the wealth being returned far exceeded what was reasonable and warranted. Prior to its collapse, Enron paid out $744 million in salary, bonuses, and stock grants to the company’s 140 senior officers, an average of $5.3 million each. This cultural drive toward easy money was not limited solely to the executives; employees and stockholders each were rewarded by ever-increasing stock prices, fostering the impetus to maintain the status quo. A vicious cycle perpetuated; as Enron's perceived success continued to grow, so grew the need for Enron to conceal the true nature of what was going on within their organization.
There are certain things that are innate within human behavior and motivation - greed, unfortunately, being one of them. That said, practicing a market culture is not in and of itself wrong; it can be utilized in an ethical manner. The way to go about instilling that kind of culture while preserving an ethical construct would involve preventing a company's ability to hide its actions - practicing the art of transparency and accountability at every level. In terms of overarching legislation, sufficient laws requiring publicly traded companies' adherence are already on the books - such as GAAP, generally accepted accounting principles, and laws that regulate outright fraud. It is, of course, the purview of the Executive Branch of our government to see that these laws are properly enforced. This would best be accomplished by conducting a reasonable expansion of the Federal Bureau of Investigations' enforcement-related resources responsible for regulating white-collar crimes. The Internal Revenue Service is also charged with oversight and enforcement of financial rules. They too should be given more ability and funding to do so.
Knowledge without character. As the leader of Enron, while Jeff Skilling was heavy in knowledge, he was light as a feather in terms of character. He represented the driving force behind the greed, proffering the “I am smarter than everyone else” mentality. His knowledge and personality made him hard to disagree with. This easily leads to a situation known as groupthink, where dissenting opinions may not be offered during decision making. Skilling knew how the financial system worked, and exactly how it could be exploited. It was he who instituted the practice of "Mark to Market Accounting" - a system by which the future value of a transaction is booked prior to it taking place. This system is what made it easier to hide the company’s losses, by using values of predicted future gains that represented no
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