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Busniess Essay

1006 words - 5 pages

Parth Vyas
Econ- 312
Enron bankruptcy
Enron Corporation was an American energy company based in Houston, Texas, United States. His company was formed in 1986 through the merger of two natural gas pipeline firms, Houston Natural Gas. Enron started out as a natural gas company put together by Kenneth Lay. Enron's natural gas pipeline brought the company much success. Supplying natural gas was a lucrative business.  Enron senior management falsified accounting records to make it look like they made a lot more money than they actually made. Stock prices don't continue to rise unless Net Income is increasing every quarter and every year. Enron did a fraud in stocks.  Enron established to ...view middle of the document...

The company made many high-risk deals, some of which were outside the company’s typical asset risk control process. Enron's had success during the early 1990s. His innovative policies were welcomed by CEO Ken Lay, who appointed skilling president and chief operating officer in late 1996. Enron executives had hoped to make the company a new model for American industry. Enron executives realized that the company could make even more selling other commodities such as steel, lumber, water, and electricity. At one point, Skilling decided to use Enron's immense pipeline to construct an Internet broadband service. The cause of Enron's brutal collapse was a culture of greed and arrogance. Enron had become the biggest participant in the natural gas business, controlling one-fifth of the North American market in 1995. Mr. Skilling was named president and chief operating officer of Enron in 1997. Enron set up a subsidiary in 1997 called Whitewing. Whitewing was created to purchase the underperforming Enron assets. Whitewing was created to buy the underperforming assets from Enron at a generous price, a price higher than it could sell those assets for. Whitewing was destined to take losses on its assets acquired from Enron. In order for Enron to find buyers for the half share in Whitewing it had to agree to compensate Whitewing for any losses on its sale of the underperforming assets with shares of Enron stock. http://www.nytimes.com/2002/01/13/us/enron-s-collapse-audacious-climb-to-success-ended-in-a-dizzying-plunge.html?pagewanted=all&src=pm. Enron was the main cause of the collapse. The senior executives believed Enron had to be the best at everything it did and that they had to protect their reputations and their compensation as the most successful executives in the U.S. When some of their business and trading ventures began to perform poorly, they tried to cover up their own failures. . Excessive stock options and excessive corporate compensation give corporate executives too many incentives to manipulate the financial accounts and the stock price of the company. The board...

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