ENRON

Enron

Enron

1. Enron

Enron's corporate culture changed radically during the mid-1990s. Bonuses and salaries became dependent on the closing of deals, and employees starting battling each other for the rights of each deal made. In May 1995, James Alexander, an executive in Enron's Global Power & Pipelines division, warned Lay of suspicious accounting of the division's finances. Lay did not act on the warning. In 1997, Skilling was promoted to president and chief operating officer. Fastow created a series of companies—codenamed (Benston, 2007) —designed to keep debt away from Enron's books while inflating the firm's profits. That year, Fortune magazine named Enron the most innovative company in the United States. At the same time, Enron launched its broadband services unit and Enron Online, the company's website for trading commodities, which soon became the largest business site in the world.

2. Authority at Enron

The most astonishing aspect of the Enron scandal was that a significant number of executives had engaged in improper actions despite the company having in place the key elements and best practices of a comprehensive ethics program. There was a detailed 64-page “Code of Ethics” with an introductory letter from Chairman Ken Lay and a “Statement of Human Rights Principles” together with a sign-off procedure on the code for each employee, an internal reporting and compliance system, visible posting of corporate values (banners in the headquarters building, signs in the parking garage, and so forth), and an employee training video—Vision and Values—discussing ethics and integrity. Enron issued a 2000 annual report on corporate responsibility. The executives were arrogant in attitude and conduct. The company strategy was one of revolutionizing trading by breaking traditional rules. The “vision” at Enron was to become the world's leading energy company—in reality, by any means necessary. There were rumors of sexual misconduct by executives. Expensive vehicles and power-oriented photogenic poses were commonplace (Boyce, 2008).

3. Corporate Culture at Enron

Most of all, it was profitable. Each year Enron reported generous and steadily rising profits and set higher and higher earnings expectations. When the corporation's share price hit $80—grossly overvalued in the eyes of many analysts—Skilling confidently asserted that $126 would be a more fitting price. Revenues climbed from $13 billion in 1998 to more than $100 billion in 2000.

However, not all analysts were enamored with the Enron phenomenon. Some expressed bewilderment at Enron's business model. To the investment community, the corporation seemed less “transparent” than most—less willing to ...