3000字英文dissertation-enron paper研究生商科dissertation,美國英朗公司丑聞事件調查：A Research on Enro
3000字英文dissertation-enron paper研究生商科dissertation(由英國dissertation網提供）-A Research on Enron scandal
Executive summary.
During that years, Enron had a great achievement in many ways.In the stock marketing, Enron just like a legend, the stock keep rose all the time peak at more than 90 US dollar per share. Its stock became almost all the analysts‘ recommendation to their clients. In the USA energy market, Enron always was the leader of the whole market. Under Kenneth Lay’s direct, Enron experienced a significant growth in energy service industry. After Lay merged Houston Natural Gas and InterNorth, several years later Jeffry Skilling and Andrew Fastow joined in Enron corporation. Here they started a new age of Enron, a “golden time” of Enron, of themselves but a disaster of public, of shareholders, of employees.
Skilling started to use mark to market accounting which lead to the big flaw. This method requires that make the future profit be estimated as current value of net future cash flows then the contracts was signed. By using the method, Enron benefit from it, their financial performance was keep increasing when they signed new contract. In another words, they actually made profit form all the new project. They showed the future income on the balance sheet.
Moreover, new projects were incessant signed by Andrew Fastow in secret ways. People may wondering how did he signed that much contracts. During that time he was the CFO of Enron, meanwhile, he was operate other two companies LJM1 & LJM2 which was fund for the purpose of create new projects and new contracts.
Eventually, their business tricks had a deadly exposure to the public. Enron corporation collapsed in one month. The stock nosedived to less than 1 US dollor per share by the end of 2001. Shareholders lost nearly $11 billion. Employees lost their jobs and their retirement fees. Some experts said that Enron just like a skyscraper built on sands. However, the point was not the single person, it was about the corporate culture, governance oversight and deregulations. Enron was the combination of problems and crimes. Such as, balance sheet was doctored, corporate conception was twisted and misunderstanding the meaning of innovation.
In Enron’s case, even it was a completely disaster, we could learn a lot from it. A closer look of Enron, there were many flaw if investor could pay more attention on the balance sheet. If the governments could pay more attention on accounting oversight, the scandal will stop at the primary situation. Governances need to be updated. For shareholders, there were few voices advised them before the scandal. Few analysts had told their clients there must some wrong with Enron’s performance and it will influent the price eventually. They did not take that advice. The consequence was certain money lost. For corporate, the problem is not to avoid the issue like Enron, companies need to enhance their corporate management and building a healthy culture behind corporate. These conceptions should be deeply concerned not just doing it on the surface. Corporate should start to how to take social responsibility and rise their business onto ethical level, not only make profit.#p#分頁標題#e#
Introduction & background:
As the globalization and the development of technology, corporations show extremely expansibility over last decades especially Enron corporation. Enron company was established in 1985 by Kenneth Lay. Under his direction, Enron had experienced a dramatic growth start from traditional sales and transportation of natural gas. In the next years, Lay seems to realized that there need to be a completely innovation of Enron. Therefore, Jeffery Skilling was brought into Enron corporation in 1990. Skilling became the chief operating officer of this company in the end. He was aimed at turn Enron into a huge in formation based business form from the building of power plants. Under Skilling’s lead, contracts between Enron and small customer for delivery of energy eventually became the only focus of this corporation. The next step of Skilling and Enron were lobby the Securities and Exchange Commission to allow the using of “mark to market” accounting into Enron.
On the other hand, what is “mark to market” accounting, and why it sounds extremely important to the development of Enron? According to Edna Carew, mark to market (MTM) refers to revalue (an asset, liability, financial instrument, etc) to the current market price, as distinct from historical cost. Carew also says MTM system is an important risk management process in financial sectors. For instance, derivatives which can lead to huge exposures to loss.
In the case of Enron, there were a aggressively usage of mark to market accounting. Basically, Skilling recorded the future profit at the beginning of a new project with other companies. And we all know that this revenue should be the money despite the primary research fund. While Enron did not do that. Enron just recorded the whole value of those projects. It seems to they have found a generator running with out any energy. In addition, in the book “Accounting / Financial Lessons of Enron: A Case Study” Harold Bierman says that “the America government grabbed mark to market system as a means of showing that Skilling did not honestly report asset values and shows losses as soon as they could be estimated.” Skilling and his supporters believed that those losses could be avoided and they just need to renegotiate them with unusual process. While, this is totally wrong, this is accounting fraud. If you find an errors in the contract, you must record it. Enron just did the opposite thing, they ignored advices from accountant dreaming about the always rising figure. The enological goal drives Enron fall into unethical hole. Officials of Enron started a wrong conception of leadership, unrealistic dream and conflict of employee’s and shareholder’s interest. Eventually,these un-normal activities lead Enron went to the rick of collapse.
However, there were another factor of explanation in Enron’s bankruptcy one person: the CFO,Andrew Fastow. In the early 1997, as the financial executive director designed his first partnership. It is aim at kept the debt out of the balance sheet of Enron. In fact, Fastow was started the first accounting fraud. Then, in the next few years, he has done a huge number of debt to show that Enron was financially healthy to keep their stock steady or increasing. Nobody would not say they are not smart. They were finding the way to having innovations but not the correct way.#p#分頁標題#e#
The victims of Enron’s eventual downfall.
Once, Enron were so pride to be the biggest energy supplier in the USA. The firm involves three major ares: Enron Wholesale Service, Enron Energy Service and Enron’s Global Asset. Enron earns billions revenue each year, employed over 20,000 workers globally and its stock packed at over 90 US dollar. While, everything cannot last long under disordered leadership and unethical commercial activities. In October 2001, There were a 638 million dollar loss be reported and 1.2 billion dollar decline in shareholder. It just a beginning of everything. In few weeks Enron’s stock plummeted to 22 cents per share.
In the court, there were many cases suing Enron company from other cooperative company, from employees. In those cases, employees were so angry about it. They hold Enron’s stock as a precious gift from the god, now all of them become just like empty papers: worthless.According to Rinard, the ex-worker of Enron, he had $472,000 share of Enron in his 401(k) plan which was just worth $40,000 after Enron bankruptcy.
In addition, some others’ retirement money and become nothing. Lacey, who worked 21 years for Enron corporation, his retirement account be freezed while the report of bad news about Enron company. He says that we could not take our money out of Enron stock into another portfolio, Basically they had us locked down to where we had no say over our future. It shows one information that ordinary workers’ life were jeopardized by those smartest guys in the same firm. Enron did not take the enough ethical responsibilities for public as well. Those smartest guys in Enron like Skilling and Fastow only concerns about the profit on the surface and their own benefit.
In this case, there are more victims in different forms, shareholders, employees, corporative partners and competitors.
Corruptions in Enron’s case.
In my viewpoint, the core factor of corruption in Enron is innovation. To be exactly it is over innovation. Enron was the most creative company in the USA among some certain areas in the primary age. Innovations on energy trading: as United State opening the energy control, Enron become the transportation system between nature gas producers and consumers. Kennith Lay also built the biggest nature gas transportation system, then Enron turn its core competence to power and electricity,Enron occupied 30% market share in the first place. Inside corporation creation: in order to achieve internal management innovation to increase the speed of information flow and the quality of information, Enron compressed self manage hierarchy from 13 to 5 levels. The innovation of business model: products and services supplier be defined as Enron’s business strategy model. Those innovations helped Enron becoming the biggest energy company in the USA.
Yet, Enron starting to blindly pursuing expand and innovation caused executives corruptions. When they were only look at the growth performance, some executives have to create a method to cover debts. Fastow did it like a positive innovation, in fact it is deregulation. It is obey the public rules on accounting sheets, a crime. Moreover, the whole corporate culture behind Enron should be the equity value. This culture drives people focus on increase the share price. Jeffry Skilling says people are working for asset, but I will change it which make asset working for me. Under this culture, the social responsibility, team building and improvement of manage control system were seriously ignored. From 1990, Enron hold unrealistic growth purpose banning the conception of running company honestly, team cooperation and take the social responsibilities. All these elements have resulted in the disaster.#p#分頁標題#e#
These were the corruption inside Enron. In the out side, only Enron’s executives knew that how many secret payoffs they have engaged in order to lobbying the government pass regulations or make a good connection with officials. Someone said Enron was the biggest supporter of Bush, they may had some deal under table. Without evidence no one can definite say so. The government need figure out a efficient way to prevent this problem first.
Deregulation
In fact, every citizens know that a revolution, a change can create more chance to us in starting businesses or making trade getting easier. Most of these deregulations might have some flaw which may create the opportunities to firms to have market being doctored. Loren Fox states that “what people find most frustrating about Enron saga is that many of Enron ‘s accounting tricks were legal” in ‘Enron: the rise and fall’. He also says that Enron’s senior managers who lobby the government to place accounting regulations were engaged in secret payoffs. The problem here is the secrecy which happens between Enron and officials in order to have some deregulations, make it easier to get job done, make those accounting tricks legalized. Thus Enron were actually jeopardize the law not to follow it. The executives thought that they could play the god, they can create the rules or doing business in their own way. Skilling said that we are making asset working for us. Turns out, it did not work well, it was his imagination.
How to prevent from the beginning
In a way, Enron saga were started form the imagination and lack of healthy corporate culture. Executives held extremely unreal viewpoint of increase the value of stock. This is illogical because what they did was record future profit into current accounting sheet which the future profit need 10 to 20 years to take it back. When the 10 years come, Enron have to create another contract to keep profit. Or if there were something going wrong that project which cannot produce profit. They need to find another new contracts to fix up this emergency immediately.
As a consequence, Andrew Fastow made lot of artificial accounting sheet and many new project and research new products with LJM1 and LJM2 which were operative by him self. LJM1 and LJM2 became the main tools for Enron to manage its balance sheet and make investors believe that Enron had a well performance. This main accounting trick was based on the imagination of sharp rise in stock value. The truth about Enron is those executives thought Enron had to be the best at everything. Actually, it did. As a result, they had to protect their reputations and their compensation. When several trading ventures began to perform poorly, they tried ro cover up their failures.
On the other hand, the whole Enron collapse could be prevent in the first place in three major ways. Firstly, enhance the auditing and oversight system. Investors should be more careful on corporate’s performance. Arthur Andersen, as auditor but also as consultant to Enron; the lack of attention shown by members of the Enron board of directors to the off-books financial entities with which Enron did business; and the lack of truthfulness by management about the health of the company and its business operations. As long as the investigation were properly Enron will not have that much accounting fraud on balance sheet. The main focus is kill big fire in primary status. Grow healthy corporate culture could be the secondary element for prevent the recurrence of similar incidents. Building corporate culture is the essential part of company strategic management. Corporations will not have correct development without it which also may lead to the dead end of companies, Enron as an example. Lastly, prevent secret payoffs occur in all the business. Obversely, in any country this kind of scandal happens but it harms other competitors and jeopardize the legal system.#p#分頁標題#e#
I have to say that the most important thing to prevent these scandal is encourage corporations taking responsibilities, encourage them building correct and healthy corporate culture which are important elements for companies survival and success. Without these elements there will be more Enron, more scandal like this.
How to prevent it happen again.
To avoid Enron collapse happen again, the governance need some adjustment to make boards responsible to the employees, shareholders as well. The government need to pay more attention on oversight of the market to protect and balance employees’ and shareholders’ lawful right and interests.
Furthermore,firms should take more social responsibility in order to gain more long-term investment. Shareholders need to be confident to invest their money on specific firms which paid more attention on employees and business partners or gained more trust in public. Those information might shows investor the development potential, the performance of market and management efficiency.
Another is investor need to be careful with strong “buy” recommendations, do more research on the stock market not just listen to analysts. Nobody knows what might it be behind the trade on the table. Stock market full of risk, do more homework and research is the first condition. Then make your wisely decision. In addition, analysts should be more responsible to their clients. Today is the technology and information’s age, most of informations could be told by many ways. Analysts should let the clients know the risk of the buying stock.
Legislation system changes after Enron scandal.
After Enron collapse House Republicans have circulated proposals for legislation designed to strengthen federal standards for auditor independence and corporate financial disclosure. The SEC chairman, Harvey Pitt, has floated similar proposals as well.
The Sarbanes-Oxley Act of 2002 was passed by The Congress. The law was plan to overseeing corporate governance and accounting standards, and rise the penalties for those firms which obey the laws. In order to prevent the illegal business activities in management inside or outside corporate and accounting industry:
留學生dissertation代寫Increasing criminal penalties for corporate wrongdoing;
Increasing disclosure requirements for periodic reports filed pursuant to the Exchange Act, particularly with respect to off-balance sheet liabilities and pro forma financial statements;
Increasing the authority and responsibilities for audit committees and introducing new independence standards for audit committee members;
Creating a new Public Company Accounting Oversight Board;
Creating professional responsibility standards for attorneys;
Limiting the scope of services that auditors may perform for Issuers;
Accelerating the disclosure of insider trading activities;
Eliminating loans by Issuers to officers and directors.#p#分頁標題#e#
Lessons
From Enron bankruptcy we all are taught a lesson in many different ways. New economy might offer us lots if opportunities, but we have to remember that the way people trading items will never change, will never creating a chance to use deceptive practice in business. People have any rights get real value for what they have pay for.
Financial cleverness is no substitute for a good corporate strategy. You may be a bright people, but in business requires much more than that. SUch as, team work, corporate culture and honest management. On the path of success, good corporate strategy plays an important role but individually smart and brilliant. Investors are more attracted by whole conception of corporate and performance, and some other elements. In fact, it is the combination of a group of factors.
代寫留學生dissertationAs those similar scandal coming out one by one, we might to question that what is role of the rules, the regulations? Those executives are above of them? Actually not, the governance regulations need to be updated. We all witnessed the Enron scandal, how they played a dramatic and tragic show in front of us. We have to admit that there were a certain flaw in the law system on business oversight which need to be adjusted. We need a more efficient and powerful system to ruling the business world without corruption.
Reference:
Edna Carew, 1996, ‘The Language of Money’ 3 rd edn, Allen & Vnvvin, Sydney.
Harold Bierman, 2008, ‘Accounting / Financial Lessons of Enron: A case Study’ World Scientific Publishing, Singapore.
Loren Fox 2003, ‘Enron: The Rise and Fall’ John Wiley & Sons, New Jersey. Canada.
David Manlove 2009, ‘A History of Enron’, 16 Maech, EzineArticles, v
