Introduction
The Enron Corporation’s organizational policies determine its initial dominance in energy trading and final bankruptcy. These policies seek to answer how Enron’s internal structure might have influenced the launching of a massive disruptive process. Investigating the relationship between organizational arrangements and significant business prospects is essential to understanding the company’s ruin. Poor human resources organizations caused accounting errors and dishonest culture resulting in the imminent bankruptcy of a prosperous firm.
The Purpose of the Study
The purpose of Salter’s research is to determine the factors that contributed to the collapse of the Enron Corporation. Studying the factors that led to bankruptcy on a specific example is important for understanding errors in organizational culture and human relationships in the business environment. The purpose of this research is also to summarize and analyze Salter’s key findings and conclusions. The research continues the theme of the case study, developing recommendations and alternative scenarios.
Key Facts and Takeaways
Enron Corporation focused on trading gas, which brought financial advantages to its founders. In 2001, an accounting fraud was uncovered, which consisted of falsifying information about the financial position of the corporation (Constable 1). The main findings of the case study are the factors that contributed to the bankruptcy of the corporation. First of all, these are management errors in the field of recruitment. The main idea is that poor governance has caused unethical problems such as audit errors and loss of trust. When the company allowed employees to falsify financial statements, understating the company’s expenses and inflating the company’s net income, this increased investor interest in the company’s shares (Ndekugri and Twum-Danso 1). The strategy turned out to be losing since falsification hid the real state of affairs.
Recommendations
Recruitment is important for every corporation because control over their responsibilities contributes to economic growth. Enron’s management resorted to unconventional and controversial strategies, allowing every employee to participate in strategic planning regardless of experience or position (Salter 3). Employees were free to create several legal entities, the network of which subsequently created an illegitimate working mechanism (Mohd Ali 4). Professionals tried to show efficiency in their work, but deceptive, not corresponding to the external image that the corporation had (Rashid 6). The main recommendation that could help Enron avoid bankruptcy would be to implement more competent personnel management. It was necessary to eliminate the excessive independence of workers. The internal ethical problems of employees could be resolved by creating a strong organizational culture with an influential leader.
Discussion Omissions
When researchers look at the collapse of Enron, they tend to downplay its effects, focusing primarily on its causes. However, it touched upon significant processes, changing the attitude of the world toward internal regulations. The process associated with the systematic concealment of losses by making changes to accounting documentation entered economic theory as “taming” (Zakshevskaya-Belyavskaya 24). Countries want to prevent such cases in the future through a legal framework with specific orders and regulations of a controlling nature (Rashid 13). Therefore, unethical behavior only benefits companies in the short term with high returns and large investments.
Conclusion
Enron went through a vivid path from becoming one of the major players in the energy market to a business that had lost its reputation. The main reason for the rapid bankruptcy was the management’s human resources organization. The work of the majority of employees was associated with the performance of knowingly illegal economic transactions and dishonest corporate culture. The omission of the discussion around Enron is focusing on the causes of its failure rather than the business implications that this case revealed.
Works Cited
Constable, Simon. “How the Enron Scandal Changed American Business Forever.” Time.Com, Web.
Mohd Ali, Badruldeen. “Reviewing Enron Scandal.” SSRN Electronic Journal, 2020, pp. 1-11. Crossref.
Ndekugri, Alhassan, and Twum-Danso, Evans. “Curbing Corporate Scandals for Global Business success.” Journal of Finance, Accounting & Management, vol. 10, no. 1, 2019, pp. 1–8. Web.
Rashid, Muhammad Mustafa. “Case Analysis: Enron; Ethics, Social Responsibility, and Ethical Accounting as Inferior Goods?” University Library of Munich, Germany, 2020, Web.
Salter, Malcolm. Innovation Corrupted: The Rise and Fall of Enron. Harvard Business School, 2005.
Zakrzewska-Bielawska, Agnieszka. Ambidextrous Strategy. Routledge, 2022.