The Collapse of EnronThe Collapse of EnronWho were the stakeholders involved in, or affected by, the collapse of Enron?All stakeholders were, obviously, affected by the collapse of Enron. However, several of them were critical, especially those being considered as market stakeholders such as suppliers, creditors, employees, and stockholders. These mentioned stakeholders seem to be Enrons most recognizable as the essential contributors to its organization. They dared of giving up an available alternative in order to take a risk with Enron in hoping of some benefits in return. But once its bankruptcy has happened, these mentioned stakeholders were in a severe case. For instance, its employees would lose their job and became unemployed, this, in turn, could eventually effect on Enrons non-market stakeholders in term of unemployment rate. Its creditors and suppliers would also experience a huge depressed from their balance sheets. In the case of creditors, a large sum of money would be gone, both principle and interest that they could have gained. This same situation would also happen to Enrons stockholders, all their investments would not return any single bits as dividends. However, Enron was an energy industry, due to its bankruptcy; a better environment could be seen, this positively affected the local communities.
Considering all aspects of the case, what factor or factors do you believe most contributed to the collapse of Enron?The collapse had many causes. Enron made failed investments in fiber-optic networks, a power plant in India, and water distribution in the U.K. Top executives in the company are accused of unethical behavior. The SEC is investigating shady deals in which they allegedly enriched themselves, and formed partnerships designed to hide $500 million in losses. These are serious problems, but corporations have survived worse, and Enron could have been fixed with new management committed to reform. The fatal blow was the collapse in the price of energy and the sudden end of the California energy crisis, which drained cash and ruined Enrons credit. Enron was mainly a trading company, a business that depends on good credit and customer confidence.
Powell, B., “Efficient, Inc. Gets Largest Cash Flow in Largely Competitive Energy Markets,” The Wall Street Journal, May 9, 2004. A close reading of this document reveals an encyclopedic knowledge of the details of many key technology, legal and accounting decisions. Enron’s trading price of $25.12 on Aug. 3 of 2004 was $5.76 higher than it had been a day earlier; and its cash flow to July 2006 was $1.46 higher than it had been a day earlier. Enron also reported losing a substantial number of employees before the first “fault” took hold on Aug. 7: an analyst who worked on “the largest single unit-testing company in the U.S. market” told the Wall Street Journal that “Eran’s traders are getting less and less involved in a major deal.” Yet in the days surrounding the Aug. 7, the top executives at Enron knew quite a bit about how to work that bug out, and they were aware that in many ways, the “fault” had been brought about by Enron’s trading patterns. “Enron’s trading was a one-time, high-interest trading event with short trading that went on for some four quarters during one of our financial reports,” the analysts at Enron told Reuters. The company’s sales were down significantly in a few weeks and the number of shares that sold for $3.28 per share dropped sharply; the company suffered from weak net income, weak profits, and a collapse in its retail store.
[3.27.3] The financial reports did not show that Enron was being criminally investigated for wrongdoing by some of the most prominent financial executives of the 1980s. “There are some significant questions regarding some of Enron’s alleged misuses of money and stock in connection with its securities trading operations,” said a SEC spokesman. “Some may well be a good start since some of the alleged losses are substantial and could indicate a significant, though not necessarily insurmountable, tax liability.” The SEC would not reveal the extent of the wrongdoing or describe Enron with specificity. The company’s board members had all been former Enron executives: the head of corporate financial operations, Patrick J. Miller, was an undersecretary of the board at the time and the chief executive of Enron and had overseen the company’s transition from its old private equity firm, Storck, to public equity at the time.
The financial reports show that Enron is being held liable with federal and state regulators for the trading of financial products and securities, and other problems related to securities trading. Enron filed for bankruptcy in 2009 and has appealed to the 10th Circuit Court of Appeals, which upheld the company’s insolvency. Under the bankruptcy act Enron can recover money from U.S. and foreign creditors and the loss of money received from other creditors. On July 7 Enron filed for Chapter 11 protection with the 10th Circuit court. A day later the 10th Circuit ruled that Enron’s financials could not have been properly regulated because of the “loss of liquidity” at Enuron “and other, non-public, financial issues, such as a possible change in government subsidies, or problems with Enuron’s ability to provide funds for new electric vehicles,” as required by a bankruptcy court order. Further, Enron contends in the lawsuit that the Bank
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bank is involved solely in the liquidation of assets, resulting in a financial loss of $400 million, which was not properly insured. Enron’s lawsuit is a separate and distinct case. Enron’s lawsuit is set for trial on March 25 in U.S. District Court for the District of Columbia. Enron’s court has not denied Enron#{r}&=&\$2,000,000 and $1,200,000,000 due. Enron’s current attorneys in the legal action, which also includes, among other things, an attorney with experience in bankruptcy law, an attorney who has been previously represented in other bankruptcy cases, and an attorney who has filed similar suit in both the U.S. and foreign courts, are set to be available to hear the case on the 10th Circuit court of appeals at the upcoming date, July 14, 2017. Enron‛s bankruptcy filing is currently scheduled for trial on March 19.
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The International Company was founded in 1852 in London as Private-Mortgage Insurance Corp., and has grown from an initial investment of $80,000 to nearly $1 billion. Through their innovative, integrated approach and their unique relationships with the general public, its shares are trusted by a diverse class of shareholders, which includes their families and subsidiaries. While the International Company has built around its strategic alliances with other financial firms, such as the Standard & Poor’s 500 Index, and with its many large players in the financial media, it has always operated as a private insurance company with a firm of its own. The Corporation’s core business is to carry out the basic and daily requirements of its competitors: provide, provide, provide customer service and to create a high-quality business process.
The Corporation has a wide range of investments and other assets. Financials range from high-quality capital allocation to low-cost capital allocation, which results in a consistent return on the investment. Our long-term investments include: (1) a variety of investment products and investments; (2) a diversified portfolio of investments designed to create a unique portfolio and capital base; and (3) diversified capital and capital structure as determined by our independent analysts and market research. Our Company’s major markets include international markets, South Asia, and parts of the Americas.
The Corporation’s shareholders include:• B.C. banks and financial institutions;• the Royal Bank of Canada, the Bank of Nova Scotia, the Federal Credit Union Society, and the C.E.O. of Goldman Sachs® • the New York Stock Exchange;• the Credit Suisse Group AG and the UBS Group. • the European Commission and the Organization of the Petroleum Exporting Countries. • The U.S. government and its European Business Roundtable. • The International Bankers Association, the International Monetary Fund, the International Monetary Fund, the Royal Bank of Canada and the International Monetary Committee.
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Fortran Global Markets, which provides investment advisory services to its clients, focuses on developing and protecting public institutions, from health care in the United States to Canada’s economy, and on health insurance and pensions, as well as government and private insurance, to the American public and to the private sector. Its primary goal is to provide the public with safe and efficient financial services and services that will reduce the financial crisis. For more information, including the Financial Institute of Canada’s Investment Advisers, visit www.FortranGlobal.ca.
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What steps should be taken now by corporate managers, stakeholders, and policy makers to prevent a similar event from occurring in the future?Corporate managers should develop their moral leadership skills. Moral leadership seems primarily a conscious task in which the leader needs to consider the emerging situations and decide on a response that best caters toward overall moral development. Unconscious strategies – such as Lays dispositions to behavior originating from his religious values – may hold back the leader from such conscious thinking. Consequently, systems thinking may become replaced with behavior that does not necessarily promote coherence in overall moral values. Therefore, in order for leaders to develop their moral leadership they need to learn to identify mental models that are holding them back from systems thinking. For example for Lay it would have been necessary to realize how his local interest in the well-being of his followers was creating chaos overall. In this respect, it seems important for leaders to actively develop strategies that identify values and experience that keep them from committing to systemic objectives.
There are also several steps the government should take to prevent future scandals:Bar auditor conflicts.The big auditing firms already have promised major changes in the way they do business. Most will no longer act as internal and external auditors for the same firm. Two of the three major accounting firms that still act as consultants will no longer sell many of those services to the same companies they audit. Putting distance between accountants and the companies they audit should increase public confidence in the auditors judgments. Those restrictions should be imposed