Running Title: Enron







The Enron Company had been instituted in the year 1985 as a natural gas entity and by 2001, it had expanded into the seventh largest company within the United States and it was the dominant player within the gas industry. It was during the same year that the company marked a massive amount of revenue in losses amounting to six hundred and eighteen million dollars. This abnormal loss prompted an investigation conducted by the Securities and Exchange Commission (SEC). As the company filed for insolvency at the closure of the 2001 trading period, it was revealed that Enron had practiced fraudulent dealings within the periods 1993 and 2001 by employing an intricate accounting system that made it easy to trim down taxes, inflate revenues and stock values, deflate losses, embezzle funds and feign the monetary positioning of the company (Goldmann, 2010).

How should Enron have been structured differently to avoid such activities?

The collapse of Enron as a company is attributed to its ineffectual corporate governance whose main objective would be to safeguard the various stakeholders within the company. The internal players consisted of the administration team, board of directors and company appraisal department. On the other hand, the external players comprised of the company accounting inspectors and analysts as they had the role of financial evaluations that would aid them in offering a comprehensive monetary positioning of the company and aid interested shareholders into making informed choices regarding their investments. From this scenario, it is quite evident that the company lacked business ethics practices beginning with the authorities and this in turn cultivated a culture hinged on corruption. With the authorities practicing fraudulent practices, the employees too are liable to be influenced by the same practices since no penalty is afforded. In fact, the authorities encouraged any form of corruption that would be required to ensure that a deal is finalized. The business culture applied in Enron should have been structured in a transparent manner that would ensure that just practices are upheld. Additionally, the corrupt authorities should have been replaced with ethical leaders that would set a fine example to the employees. A monitoring structure should have been adopted as a way of assessing and appraising the company and its workers practices (Goldmann, 2010).

Did Enron’s officers act within the scope of their authority?

The scope of authority according to business practices encompass the various acceptable moral, ethical and integral practices that guide business leaders towards achieving the company’s defined goals (James, et al., 2000). Contextualizing Enron’s business practices, it is quite evident that the authorities failed to act within their scope of authority; first by acting as the initiators of the corrupt dealings and secondly by encouraging the employees into corruption.

The corporate culture at Enron

First, the culture prevalent in Enron was persistent with the need to propel the company into becoming the dominant player in the natural gas industry on a global scale. Secondly, the management team always graded their workers frequently with regard to performance and consequently, this infused a sense of competition among the workforce that inferred rivalry in a bid to attain a good image to the management and the other workers. Thirdly, the management team supported promoted spendthrift practices in their standard of living and the workers soon imitated and adapted to the management’s standards. The workers as well as the company’s authorities therefore resorted to corruption in order to finance their expensive lifestyles as well as improve the company’s image to potential investors with the aim of acquiring more customers and shareholder whose wealth they could swindle (Epstein, & Lee, 2009). Fourth, new workers were also initiated within the company with such corrupt practices being sold to them as acceptable behavior within the company for the sake of attaining the preset company objectives. Therefore, no form of dilution occurred in terms of labor mobility. Lastly, the impunity atmosphere created assured the workers that their actions and behavior was suitable for survival purposes. All these factors combined towards fraudulent practices that were never reported until the investigation was conducted.

Identifying two alleged irregularities in the actions between sellers of securities and Enron

            Enron and its security sellers often inflated its monetary worth by adjusting their financial statements or quoting assets that have been acquired by individuals for a short period until the targeted customer has been compromised. For instance, the Merrill Lynch Company aided Enron in their asset inflation within the 1999 trade period. The objective of the joint venture was to misrepresent the financial position of Enron with the indication that at the closure of the trading period, the company had attained a thirty-three percent growth level, which translated to an equivalent of sixty million dollars (U.S. Securities and Exchange Commission, 2003). Within this period, the company quoted its closing net worth as being two hundred and fifty nine million dollars translating to earning accorded to every share being 1.17 dollars from the previous 1.09 dollars in the 1998 commercial period. Secondly, Barclays Bank had actually adjusted various Enron’s balance books with an aim of generating good financial records that would see Enron safely through its corrupt practices. This was achieved by the fabrication of the Colonnade agreement that aided with the concealment of the hefty debt that the company had been operating on.



Was Enron liable for the actions of its agents and employees?

Yes, Enron was responsible for the actions that its employees and agents resorted to in a bid to remain significant within the workplace. The initial responsibility is hinged on the fact that the company beginning from the management level as discussed earlier had promoted corruption as a means towards the desired end. Workers during the assessment and grading sessions were actually commended for the fraudulent practices, with the highly credited employees being those that got involved with more paying unethical deals. Verbal appreciation is a way in which employees acquire job satisfaction and this would only act as a way of creating motivation to the workers (Kumar & Sharma, 2000). Had the administration discouraged such practices, the workers would never have thought of indulging in them with the penalties attached being well known and communicated among the company workers.














Epstein, M. J., & Lee, J. Y. (2009). Advances in Management Accounting, Volume 17. West Yorkshire, UK: Emerald Group Publishing.

Goldmann, P. (2010). Fraud in the Markets: Why It Happens and How to Fight It. Hoboken, NJ: John Wiley and Sons.

Jones, G. R., George, J. M., & Hill, C. W. L. (2000). Contemporary management. Indianapolis, IN: Irwin/McGraw-Hill.

Kumar, A., & Sharma, R. (2000). Principles Of Business Management. Delhi, India: Atlantic Publishers & Distributors.

U.S. Securities and Exchange Commission. (2003). SEC Charges Merrill Lynch, Four Merrill Lynch Executives with Aiding and Abetting Enron Accounting Fraud. Retrieved from

Still stressed from student homework?
Get quality assistance from academic writers!

WELCOME TO OUR NEW SITE. We Have Redesigned Our Website With You In Mind. Enjoy The New Experience With 15% OFF