Enron Case Study. How did the corporate culture of Enron contribute to its bankruptcy?People describe Enron’s corporate culture as arrogant and prideful. The company employed the best and brightest graduates from top universities, as well as competent, creative and hardworking employees. However, Enron’s compensation plan was more focused on generating profits for shareholders than on enriching employee’s wealth, which resulted in a highly competent and aggressive culture. Enron’s corporate culture encouraged risky behavior, if not breaking the rules. Also, Skilling develop a system in which the employees were ranked every six months. As a result, the employees could not deliver bad news because that could result in the “death” of the messenger, so the problems in the trading operations were hidden instead of being communicated to the management. The business ethic issue is that Lay (CEO) lied about the financial condition of the company and some employees knew about it and just ignored it.
Did Enrons bankers, auditors, and attorneys contribute to Enrons demise? If so, what was their contribution?Yes. Enron’s attorneys like Venson and Elkins, the investment bank Merry Lynch, and the audit company Arthur Andersen contributed to Enron’s fall. First, Enron was Venson and Elkins top client. This law firm helped structure some of Enron’s special purpose partnerships. There was a letter directed to Enron’s CEO that indicated that the law firm supported the legality of some of Enron’s deals. Second, the brokerage and investment bank Merry Lynch bought Nigerian barges for $28 million and Enron financed $21 million. It was said that Enron was going to buy Merry Lynch investment out in six months with a 15% rate of return. However, there was a document that indicated that the transaction might not be appropriate. Finally, Arthur Andersen, as Enron’s auditor, was
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What did you do to make sure that Enron’s securities are safe?
The financial statements for Enron went to a financial firm that was investigating Enron’s fraud charges. They got a letter that was signed by Arndt and Enron’s finance director from the investment bank Arthur Andersen. They received the letters and received affidavits stating that the law firm was supporting Enron’s legal action. It was alleged that Enron’s financial adviser, Stephen A. O. Smith and Enron’s accountant, John B. Tippett, met with the law firm. Enron’s then received about $1 million in financial statements and then Enron’s lawyers got the letters and the affidavits. It was thought that Enron’s lawyers would have been involved in the Enron’s prosecution, but not have a public record of it. That is a mystery to me. I believe that Enron was involved in the Enron’s fraudulent lawsuits, but I believe this was more than just Enron’s legal action and that Enron’s lawyers were involved with Enron’s fraud prosecutions, and I believe these lawyers contributed to Enron’s crimes. It was said that Enron’s financial advisor, Jonathan Tippett had a problem with Enron’s securities when Enron’s financial adviser bought a 20,000 kronabinet loan and Enron’s auditor turned whistleblower. In fact it was reported in a newspaper that he tried to prevent it from going to the press. As I said, I believe this was Enron’s legal action, but I don’t believe it got the attention that it deserves. Enron’s lawyers are going through this process, and I think Enron’s financial assistance is not being provided. If Enron’s lawyers were working as Enron’s legal representatives they would be taking this seriously. If Enron’s lawyers were working in Enron’s financial assistance, they would have made a lot of money, but maybe not the money needed to get a job. Of course that’s what happened. If you look closely at what’s going on, you see Enron’s financial advisers went through this process and didn’t get in trouble. It’s not because these advisers were Enron’s financial advisers but maybe they really could have used themselves and their lawyers to get the money they needed. It’s just a strange example. We can’t say for certain but when the Enron’s lawsuit comes, the government is going to use cases like those from the past to try to come to a settlement and the attorney general will have to decide what the settlement is. I’m not asking for the government to get involved in Enron’s lawsuit, but it’s very strange that it happened at all. People who are looking at Enron’s bankruptcy are going to continue to look for answers and help them, not to seek financial help but to continue to help Enron’s. In some ways Enron’s lawsuit went to show that the government isn’t good at handling financial