The Rise and Fall of

Enron Corporation

1930:The company is founded as Northern Natural Gas

Company in Omaha, Nebraska.
1947:The company is listed on New York Stock Exchange.
1980:The companys name is changed to InterNorth, Inc.
1985:A merger with Houston Natural Gas Corp. takes
place.
1986:The companys name changed to Enron; the new
company is headquartered in Houston.
1991:Enron begins overseas expansion.
1999:Launches EnronOnline.
2001:Files for bankruptcy after previously hidden losses
come to light.
Enron was praised for its expansions and ambitious
projects and named "America's Most Innovative
Company" byFortune for six consecutive years between
1996 and 2001.

Enron Corp. is a company that reached dramatic

heights, only to face a dizzying collapse.
The story ends with the bankruptcy of one of
America's largest corporations.
Enron's collapse affected the lives of thousands
of employees and shook Wall Street to its core.
At Enron's peak, its shares were worth $90.75,
but after the company declared bankruptcy on
December 2, 2001, they plummeted to $0.67 by
January 2002.
To this day, many wonder how such a powerful
business disintegrated almost overnight and how
it managed to fool the regulators with fake, offthe-books corporations for so long.

What led to the collapse of

Enron?

The collapse of Enron was mainly due to

Jeff Skilling, Mckinsey consultant, who
was appointed as Chief Operating Officer.
Skilling proposed business expansion
despite of the inadequate cash flow being
generateed by the business which
eventually blew up the business suddenly
and dramatically. Another factor is the
usage of mark-to-market valuation on
contracts to produce artificially laarge
earnings.

How did the top leadership at Enron

undermine the foundational values of
the Enron Code of Ethics?
The Enrons top leadership violated Enrons
Code of Ethics through:
Disregarding technical and professional
standards like the improper valuation of
trading securities and incorrect recognition
of revenue to cover and losses incurred
which could be detrimental to effectively
and efficiently prove PROFESSIONAL
COMPETENCE AND DUE CARE.

Non-disclosure of big losses incurred by

the business to intended users.
(CONFIDENTIALITY)
Personal intention of Skilling who leads
the management through deceiving users
in order for him to commit fraud.
(INTEGRITY VIOLATION)
Improper discharging of professional
responsibilities when Skilling coordinated
with other employees in the course of
fraud. (OBJECTIVITY VIOLATION)
Non-compliance with relevant law and
regulations. (PROFESSIONAL BEHAVIOR
VIOLATION

Given Lays and Skillings operating

beliefs and the Enron Code of Ethics,
what expectations regarding ethical
decisions and actions should Enrons
employees reasonably had?

Skillings vision was to transform Enron into a giant,

asset-light operation, trading power generally and his
next target was trading electricity. So Enron then took
the decision to build on its international presence.
Considering the operating beliefs of Skilling and Lay,
employees do form part on the business dotcom boom
and must strictly abide to decisions and actions that
prowess ethical like disregarding incentives for
personal interest in exchange for the commission of
unjust and illegal acts. But the actual scenario was the
commission of employee fraud, wherein they are
constantly benefited.

How did Enrons corporate culture

promote unethical decisions and
actions?
The company build projects and immediately
claim and record the projected profit on its
book even though the company did not earn it
yet. The actual revenue was less than the
projected amount. Losses and other liabilities
were also not reported. These practices were
not corrected but instead it continued over
years because despite of Enrons poor practices
Arthur Andersen offered stamp of approval
which was enough for investors.