Enron Paper pt 1

Date: July 10, 2008
Time: 11:00 PM
Place: Kitchen

Leadership is a major aspect of a firm’s performance. Leaders are necessary to facilitate achieving financial and productivity goals. Just as important, leaders ensure a standard of ethical behavior by their subordinates. Enron is a recent example of a firm with ethical leadership problems. The leadership styles and attributes facilitated its failure. Many measures can be taken to cope and solve this dilemma.
Enron was founded and led in 1985 when Houston Natural Gas merged with Internorth, a natural gas company of Omaha, Nebraska. With Kenneth Lay as its leader, Enron served as a pipeline company, the middleman between suppliers and buyers of natural gas. Deregulation and other business environment changes allowed Enron to become a leading energy and commodities trader. In 1999, Enron jumped on the internet bandwagon by conducting operations online. Its diversified portfolio ranged from electricity to plastic, and included other commodities such oil to natural gas and petrochemicals. The list doesn’t stop there. Enron’s portfolio also included dealings with shipping, steel, coal, paper, metals, pulp, and financial derivatives. At one point, Enron had $80 billion in revenues and profits of $1 billion! This “success” story was acclaimed by Fortune Magazine as America’s most innovative company for six years in a row. (Healy, 2003)
Things soon turned very ugly at Enron. In May 2001, Enron Vice-Chairman Clifford Baxter resigned and three months later so did the CEO, Jeffrey Skilling. Rumors were floating around that Enron’s financials were “shady.” Investors and analysts increased pressure for disclosure of various partnerships that were off the books. On October 16, 2001 Enron announced major adjustments to its financial statements. $544 million in after tax expenses were being deducted from earnings. Shareholder equity was being reduced by $1.2 billion! More so-called adjustments to the financial performance were announced during the following weeks. Finally, on December 2, 2001, Enron filed for bankruptcy protection.