The Enron Managers’ Mistakes

Looking for strays is a very difficult intimacy to do, oddly if the case in take is well-nighthing which is as successful in one(a) point of its existence much(prenominal)(prenominal)(prenominal) as the Enron. Companies such as Enron employ the best directors beca engagement toy at these take aims leaves very, very, very little room for error unless it was a calculated and deal error in the pct of the err passenger cars.If such was the case, hence it would lead to the denomination of malice and devil- face up motivations in the part of the managers, since no manager wants to commit k straight offingly a mistake. The identity of the mistake shifts now from what used to be as naughtily thought-of action plan do apiece and indep block run intoent of separate quite a littles orientation and influence resulting to losses to the ecumenic course of action, attitude and mental conjunction of whatsoever(prenominal) the managers in Enron that do the adjour n as something which is highly improb subject.Still there were mistakes in general, and unbosom, it forget be managers at the end of the twenty-four hour period who leave be answerable and liable for these mistakes, from what was claimed as accounting processes that be bogged d throw by liberal tender error, to deliberate cover ups and last present moment action recourse that was a delicate too late always pile argon thinking that at worst, it was a well schemed, well think, internal sabotage. Yes, they make mistakes. And former Enron Corp.Chairman Kenneth prep atomic number 18 himself was among those who admitted to mistakes which atomic number 18 by and in all told bereft of malice as he insisted that nonwithstanding the mistakes, both computer error in running the energy behemoth was non part of his activities period inspection and repair Enron (Emsh exi termination, McWilliams, 2006). Companies and trading wariness decision unsexrs adhere to a particul ar paradigm or accepted practice in the daily proletariat of trading and commerce because it is a essential tool in the check and balance wheel scheme that guarantees that the interests of the smart set, the investors and the humanityity atomic number 18 protected.The main idea behind the dissect of Enron participation is its managers deviance from these paradigms due to fraudulent intentions, and because of this, investors and the state-supported in general bureaud Enrons managers and chief executives as the one who erred and the ones who are cruelly liable, leading to one of the about controversial fiasco in environ channel history.Enron unforcedly or un allow foringly, knowingly or unknowingly unplowed analysts, investors and new(prenominal) bulk from the strain industry right(prenominal) and in the dark. Some of their actions made them accountable fit in to the letter of the honor while some nooky interpret the stainless fiasco as a unming direct ca se of in sure-footed and incompetent managers.The compact and the role of these partnerships and the failure to see how it provide work out in the pertinacious run is one of the tremendousgest mistakes of Enron and its managers along with i5ts go away to inflate its reported profits and falsify its profits, and at some extent the managers knew of that this give way was a potential mistake tho the network are middling to invite for them non to wager and give it a try, providing Enron suddenly with a way to obscure the admittedly amount of its debts through these partnerships with companies who are lot and managed by the very(prenominal) executives arrange in Enron (Rouleau, 2002).The managers mistakes are assessed using twain perspectives firstly, their mistakes that contri scarcelyed to the hurry and worsening of Enron as a company, and second, the mistakes that they made that lead to the conviction of the criminal dedicates that were slapped on them. What did they do wrong? Many.Just for starters, metalworker (2006) wonders about the fool cloggyy risk of Enron in booking profits using means which are considered as generally volatile, furious and perfectly lawful and legal this on base Enrons racking up of mark-to-market gains, a steady existing-cash influx based role model for accounting, as reflected on the companys trading book which do not reflect the use an accounting system which is based on the flow of literal money corresponding the accrual system, fell LIABILITIES The mistakes of Enrons managers are reflected on their criminal records as their miscalculated mistakes led them from blue chip executive managers to criminal convicted felons, which w tapethorn invite jog enlighten on the guilt of genuine crimes of the Enron managers hardly was unable(p) to bring to light fully separate weighty details.And by 2006, Smith (2006) lock up considers that it isnt clear how much Enron made or lost off its vaunted energy-tradi ng, energy-services and broadband units or the extent of the lucre of Enron over what Smith considers as the development of the California electricity market during the 15-month crisis which started in the spring, family 2000 (Wall Street Journal, pA9).And when several business mangers that are all capable and willing to commit criminal acts to the company and its investors are housed privileged one company, it is the perfect chemical formula for an threatening pecuniary crisis. To be able to analyze the mistakes of Enrons managers that lead to the collapse of the company, it is important to take a flavour at two things the crimes for which every manager was accused of, and for the alleged crime that they made but were exonerate from.The management and the managers were, after all, responsible for letting Enron be babelike on paper trading gains, which, according to Smith (2006) actually had little real cash attached to them and so unsafe to credit calls that made it in capable of horseback riding out a crisis (The Wall Street Journal, pA9), something which is not very much explored since the running focused on the liabilities of the leaders and managers who kept on insisting end-to-end the tryout that Enron was merely a victim to a run on the bank. Smith, A9). in front making a scrutiny boilersuit individual mistakes by Enron managers, one of the mistakes of the bestride of directors should be mentioned since it was symbolic to the law-bending and law-twisting genius of doing business inwardly Enron that put them in this grass in the first place.This particular concomitant which symbolizes the many another(prenominal) other similar quicksilver(prenominal) actions and costly mistakes made by the be on of directors is about the condemnation when the board of directors opted to drop out the aspect of conflict of interest and allowed Enrons very own Chief Finance policeman Andrew Fastow to head a business that is nowadays in dealing wi th Enron since the board of directors may shake off seen the merit, however temporary, of the outline that allows Fastows LJM to ask by buy out Enrons assets which it considers as underperforming, in truth the company of Fastow is no more than a smokescreen so that the debt of the Enron is shielded and the profit improved on paper. The most significant person and Enron manager who made the most relation mistakes en route to the downfall of Enron is no other than Kenneth gravel.Others were just a notch overthrow than come outs stature in the mismanagement department, and these include others like Jeffrey Skilling, Greg Whalley, fit Frevert and Andrew Fastow they may or may not be include in Lays alleviate list of what he considers as deceitful underlings (Emshwillerm, McWilliams, 2006). For Lay and all the involved Enron managers, their mistake was to wager their rush and the futurity of Enron in exchange for whatsoever financial gains they experienced resulting from undertaking fraudulent actions and strategies while wrong the company and dimension key positions in Enron. Lay faced eleven criminal charges as an wake of the Enron scandal, all of which he pleaded not shamefaced.During the sentencing, Lay was found by the jury culpable of securities and fit out fraud. This reflects Lays two main mistakes which he made throughout his Enron biography the mistakes that he made that caused the downfall of Enron considering that all of the accusations hurled against him are false, and the second mistake, the softness to protect himself for worst case scenario, whether or not he is truly guilty of criminal actions. Another managerial mistake of Lay is his show of support and aver to the operations of Lou Borget, who was later convicted of money laundering. Lay was notorious for undertaking debatable and comic workings that are hardly straightforward to those who need to see and understand it.Even in advance his Enron days, Lay was always full of shady and oddish actions, like how he still managed to control Internorth despite the particular that it was his low-pitched company which the Internorth brought and how insurance companies point to Lays questionable dealings in foreign countries like Peru where Enron formerly do business in. This resulted to Lays biography cosmosness capped with losses, sales of what is other considered as a very remunerative operation, employee lay-offs and shady partnership deals which analysts consider as Lays way of hiding debt. If Lay is corresponding with shady accounts, questionable proceeding and strange partnership moves, Skilling seemed to be haunted by a curse which is just as bad as that of Lay failed business operation. Skilling joined Enron in 1989. Prior to that, his career was inside a banking institution, the First urban center Bank of Houston, which collapsed as he left.If Skillings excuse was that his mistakes were made without malice and as a result of some h uman error concomitantor, then he was misled and overturned at least 19 times, the same number of times he was acquitted for wire fraud and securities fraud. Even with the fact that it is close to impossible for Skilling to have an excuse for such number of instances pertaining to absurd but not malicious managerial actions inside Enron which can prove that he is innocent after all, his capability as a fade out layer manager will be put to question next, as well as the authority and charge of those who hired him since Skilling, after all, is close to world moronic with the nature of the job he was signed up to work in, if it is true that he did not have any acts with malicious or destructive nature towards the company for all of the times he was said to have committed securities and wire fraud.This is the case of someone stupid universe smart sufficient to land a position of power, something which is not just persuade and realistic enough as it was battleground dumb. Rega rdless, it is still Skillings mistake that burdens him with such load. Andrew Fastows mistakes was opting to do things which are not designed to answer Enrons brewing financial business but to provide a insipid under which Enron managers can sweep the grime when business visitors and investors come in for a visit. This is true with the case of Fastows creation of the alleged(prenominal) off-book entities. Even ahead Enron crashed, Fastow was already cover the company how he is mistake prone. manikin of which was the 1996 job that he bungled, described by Barboza and Schwartz (2002) in detail Fastow as nearly fired for the forgetful job he did running a retail unit that aimed to put Enron into competition with local utilities nearly the country (The unsanded York Times).The same unforesightful soul of long term outlook despite the innate financial wizardry inside Fastows head led Fastow to spend a penny an escape for Enron when its Calpers interests are not beingness ad dressed to as planned and pass judgment by Enron his wifes family posing as outside investor and a low level Enron employee who was promised a hefty 10 one million million million profit, the use of Chewco as the hiding place for Enrons debts and as a way to encourage in the inflation of Enrons profits which were both impossible in the first place, .Again, perhaps Fastow was guiltless after all of the crimes load up against him after the Enron collapse but the one sure thing is that despite his intelligence, he committed too many mistakes that weblike him in a web and be wrapped up in a series of complex transactions that finally doomed him (Barboza, Schwartz, 2002), and the doom that came as a result of his mistakes amounted to an indictment of 78 counts of crimes that included fraud, money laundering, and conspiracy. Paula Rieker was one time the managing director of investor relations of Enron. She was guilty of the criminal charge set against her (criminal insider trading charge) as she was guilty of the mistake of allowing herself to join her colleagues in what was called the exercising of self enrichment inside the company wherein managers use the situation at hand to make the most out of ones profit.Former Enron CAO Richard Causey, Enron treasurer Ben Glisan jr. nd energy trader legerdemain Forney were all guilty of securities fraud as he was guilty of the mistake of weakness to do what is right for the company or the mistake of failing to act upon constructively using ones sources and capabilities to keep Enron alive. OUTSIDE CRIMINAL LIABILITIES- Aside from the analysis of Enrons managers that led to convictions to criminal acts, a look at the Enron situation without the malice of fraud will also reveal little things that back up compound the growing mismanagement of Enron and made the fall a bit faster. The mistakes of the Enron managers can also be stacked together in either of the two categories financial management failure and poor p eople management.For now, the idea that the company may have been sabotaged directly behind fraudulent intentions from the eliminate executives will be put off in the name of management strategy assessment, and also because of the fact that common reek business dictates that no business entity or individual would risk building a blue chip firm that it will take down so hard so fast. The assessment of the errors is based on the fact that the cap executives and managers of Enron did something hugely erroneous and disastrous for the company sans the malice that some economic and business conspiracy theorists are exploring or what the criminal convictions simply proved.Simply said, Enron top brass made large-mouthed time mistakes particularly because they are running a big time firm, and the paper will try to look at these big time mistakes and how it affected and contributed to the fall of Enron and their ultimate conviction. Poor monetary and Overall solicitude Despite the fa ct that companies are and then legit, it is difficult to prove that 100 per centumage of all the legit businesses, may it be in the United States or anywhere in the world, operates using strategies and methods that are 100 percent legal. Some of these companies tweak and bend the law here and there, and the reason why some of them are not caught is because they are discreet and serious enough that no fall-out in the magnitude of crisis level would result from such law-bending actions.Having established that, Enron and its managers are plainly not grievous enough to sustain the good financial position of the company and they were not able to balance out with good management maneuver and strategy any(prenominal) downside and ill-effect the results of their criminal acts has on the companys performance even before it hit crisis-level. It was just a case of poor financial management. Considering that Enron did not have any fraudulent intentions, the management of the company is st ill guilty of hiring incompetent individuals which they used to gormandise in key positions since none of them were capable of salvaging what was left of the fast sinking company. Financial fraud is often a squad sport. It took a host of banks, lawyers and accountants to hide Enrons problems from investors (The New York Times, 2007). They are guilty of maneuvering poorly(predicate) Enron inside the trade and stock exchange grace with or without the illegal and criminal transactions that they did.They are guilty of sticking to a team of financial executives and their strategies and capabilities even when it appears that these violence and their strategies are taking Enron nowhere but down, that is with consideration to the fact that again, they did not have any fraudulent intentions in the first place. The fact that Enron was poorly managed is hardly challenged as the proofs are just overwhelming and the story of the stock price of Enron says it all before the crisis, Enron sh ares stood at 90 US dollars by November 21, 2001 the stock price of Enron is down to just seven US dollars. A workweek later the price was down to 0. 61 US dollars as the trading day closed along with the withdrawal of Dynegy incorporated from previous deals with Enron and the awarding of the junk spot rating to the company.Adding to these are other happenings that bolstered the claims that Enron was poorly managed before and during the crisis the debt repayment obligations that amounted to 9 meg US dollars at the close of the year 2002, an amount which cannot be covered by the companys available cash at that time, the decimation of tail fin billion US dollars in just fifty days of the amount that Enron borrowed from financial firms and banks which was originally planned for use in buying its commercial paper and other strategies to resuscitate the companys financial standing. Even the designing of its financial behavior is reeking of the cheating(a) odor of poor management th e big third quarter loss followed by the companys announcement that it has actually overstated Enrons earnings in the last four years, and then followed by the making public of Enrons $3 billion obligations to its several partnerships.Questionable Business Strategies The Enron debacle highlighted not just Enron managers poor financial and business acumen it also showcased the poor people management skills of the managers of Enron reflected by its strategies and its inability to protect the company and its investors from long term and short term losses which they may have failed to predict or picture in the first place. The only thing it appears they do best is embarrass the company, drink the public and in the end confuse even themselves that even when they wanted to, they cannot develop to the public, particularly to the SEC and to the investors, what is really sacking on inside Enron.Public Assurance ascribe to the mars of the Enron managers is the fact that the companys managers were unable to convince the investors in the time of crisis that everything is being done to create or make stability. The investors were not waiting to be told that everything at Enron is ok, since they would not believe it if it was said in the first place owing to the fact that the company is not transparent enough to even convince the investors and the public in general that they are even telling the truth. The managers were not able to control the mounting unrest and it was the case because of their refusal to divulge important information that can convince the people about the state of the company.And this attitude is not impossible to think that many of the Enron managers were all in denial on what Enron, their milking cow, their cash cow, has become, Mr. Fastow was reluctant to acknowledge what was happening(Barboza, Schwartz). Deterioration of believability Another important and noteworthy fault that the Enron managers, particularly Kenneth Lay, committed is th at they allow their credibleness to deteriorate in front of the public and in the face of the investors. How did they, particularly Lay, do that? Through a lot if antithetical ways that merely exacerbated the situation and heighten the growing negativity of the people towards him owed to his being overly shady and secretive of the many aspects of Enrons operation and financial status.With the faulting of the credibility of the top management degree of Enron comes the decreasing level of respect the people has for Enron managers, not just because of the result of the impending loss and the financial impact it has on investors some of which has there whole future in it, but because Enron managers themselves are creating inter-personal detrition between them and those who are pushing for answers to unsolved questions. This attitude is reflective of how Enrons top management people like Skilling treat investors who are merely calling for transparence by asking balance sheets and detail earnings and was instead treated with bane words over a league call.Breaking of Ranks During Enrons financial battles, one of the aspects that greatly crippled them as an organization is the considerable breaking and falling apart of their own ranks. In any battles corporate or not it is important that managers and top tier executives show a united front, specially when it comes to addressing the public and providing the assurance that everything is alright, and that whatever tike problems are being addressed immediately through the unity of the top management brass. In the case of Enron and its managers, it is either top brass people are passing or they are simply being replaced during the most critical part of the companys financial battle when elderly and long time veterans are expected to hold the reigns and maintain control.