THE ENRON SCANDAL

Presenters;
Madiha Salar Uzma Siddiqui

Enron corporation
Former Type: Public company Industry: Energy Founded: Omaha, Nebraska 1985 Founder: Kenneth Lay Headquarters: Houston, TX US Defunct: December 2001 Key People:
Kenneth Lay, Founder, Chairman and CEO Jeffery Skilling, Former President, CEO and COO Andrew Fastow, Former CFO Rebecca Mark-Jusbasche, Former Vice Chairman

Employees: approximately 22,000

Good Old Days

Enron was formed in the mid-1980s by Ken Lay

Under Lay, Enron became the largest natural gas and electricity trader in North America
Jeff Skilling was hired by Lay in 1990 Enron became the 7th largest company in America under Lay and Skilling Enron became the global market leader The companys earnings grew

Reason of Enron Collapse

Conflict of interest False and misleading picture of its financial health Arrogant corporate culture

Consequences of Enron Scandal

Enrons stock which was once $70 billion became worthless. Thousands of workers lost their jobs and their life savings. Millions of small investors, deceived by the companys bogus accounts, lost some 60 billion dollars within a few days.

 Citizens trust in the American economic system was destroyed.

Loss of foreign capital credibility in US markets due to crony capitalism. The rules for company financial reporting were sharpened Sarbanes Oxley Act (2002). Banks were suspected of collusion.

Recommendations
Avoid building a culture that emphasizes winning at all costs Treat investors, employees, customers and suppliers like family Create an active, independent Board of Directors

Recommendations (cont.)
Emphasize personal accountability Install an effective ethics compliance program and encourage/reward people

Thank You