Case Study

Case study

Introduction

This case study is about the company Enron which reached at the peak but soon met with the worst collapse of the entire company. Its insolvency caused thousands of employees to deal with the crucial time and affected their lives badly. This incident put people on wonder that how such a powerful entity can be demolished suddenly.

The overnight collapse of such a powerful entity was an unforgettable yet unfortunate incident. The underlying reasons are very much important to know in order to avoid such failure in the future. Enron used to be known for its highly effective management and control system. The cultural environment ruined the entire company. The main reason of the collapse was the overriding influence of powerful risk taking culture on Enron's control management. The comprehensive causes of the bankruptcy will be addressed in detail.

Discussion

Organizational culture is the group of behavior of individuals who are associated with the organization. A culture consists of traditions, values, standards, structures and principles. The interaction among people, client and stakeholders have a distinct impact on organizational culture. According to business ethics, it assists us to identify what is bad and what is good. It describes what to do and what not to do in order to run the business morally. Moreover, it deals with how people and organizations should act or perform in the business world.

Analysis of the company

The company Enron has started to fall in the year 2000. One of the reasons was that, the CEO Jeffrey Skilling used to hide all the economic losses of trading business and additional operations of the corporation. This course of action is known as mark-to-market accounting. When there is a trading of securities, then this accounting is applied. This is unfortunate and devastating for people who run other businesses.Whenever they constructed any kind of asset, for instance the power plant, they stated the predictable profit in their books without any delay. They did not give importance to the loss as they did not use to record their losses in their books. For that reason, the losses were not reported. This behavior showed that the company did not require any profits, and it was ready to cancel any type of loss without realizing the company's outcome.

Ken Lay, was the Chairman and Chief Executive of Enron and Jeffrey Skilling who was the President and Chief Executive of the company, they created the system which was fully imperfect and defected with the purpose of self-enhancement and developing their intellectual supremacy at the cost of their employees and shareholders.

The fall of Enron Company was a big shock for the entire financial world. Since, it was the USA's seventh leading and most esteemed firm; it was the great distress for whole world under what circumstances this organization has been collapsed and how it moved towards the bankruptcy. In addition to it, there were 10 different committees who were involved in identifying as to why it happened and what exactly appeared to be the unethical actions like ...