The merger between Houston Natural Gas and InterNorth produced Enron in 1985 which started off slowly specializing in the natural gas and then grew to start increasing its product range. Kenneth Lay founded Enron and became Enron’s Chairman and CEO. However, Enron management aggressively decided the need to grow faster, increase investor’s confidence, attract more investments and increase their credit rating. In order to achieve their vision, the company pushed for the change to the constitution and the legislature removed the law which relaxed regulations in the industry. The changes in accounting methods enabled Enron to inflate the revenues by using mark-to-market method. Enron also vouched …show more content…
It had conflicting issues on how it attracted investors and built investor confidence. The corporate culture was not working because of the unscrupulous deals that only focused on the short-term earnings. The management created a notion that the company’s revenues were increasing and made the employees to think that the company had so much money. The expenditure accounts of the employees, the management, and the executives excessively increased as executives earned twice as much as their competitors. The salaries, bonuses and stock went up each year sometimes by about 50%. Employees were attracted by the high bonus payments and stock options. (Need a reference …show more content…
It provided for the establishment of the Public Company Accounting Oversight Board. It would develop standards for operations of public companies. SEC also made some changes to the stock exchange’s regulations.
Summary and Conclusion
The company began a very successful journey to productivity. The merging of the two very successful companies made Enron a very strong competitor in the market. However, management failed in its obligation to nurture the company due to their greed and ego.
Enron executives and management team made wrong decisions based on manipulating records and involving bankers in their scheme. There should be always close monitoring to public companies which will hinder the decision makers from attempting to do malpractices.
Today it would seem like Enron never existed at all, however the pain it caused provides great lessons about corporate