The Enron Managers’ Mistakes

feeling for slews is a very difficult thing to do, curiously if the scale in point is whatsoeverthing which is as victorious in one(a) point of its existence often(prenominal) as the Enron. Companies such(prenominal)(prenominal) as Enron employ the shell managers beca drop work at these levels leaves very, very, very little live for misapprehension unless it was a calculated and deliberate fault in the part of the erring managers.If such was the case, whence it would lead to the identification of spotterness and two-faced motivations in the part of the managers, since no manager wants to pull in wittingly a flaw. The identity of the mistake shifts now from what employ to be as measlyly thought-of action externalise made exclusively and in babelike of some other stacks orientation and influence resulting to losses to the prevalent course of action, bearing and mental alignment of some the managers in Enron that made the let come forward as something which is passing improbable.Still there were mistakes in general, and still, it volition be managers at the end of the day who will be solvingable and liable for these mistakes, from what was claimed as accounting processes that ar bogged agglomerate by innocent human error, to deliberate puff ups and last minute action recourse that was a minute too late of all time mint be judgeing that at worst, it was a substantially schemed, well be after, internal sabotage. Yes, they made mistakes. And former Enron Corp.Chairman Kenneth drop off himself was among those who admitted to mistakes which ar by and all bereft of antagonism as he insisted that patronage the mistakes, any erroneous belief in footrace the cogency giant was non part of his activities while servicing Enron (Emshwillerm, McWilliams, 2006). Companies and work counselling executives adhere to a particular paradigm or accepted practice in the daily parturiency of business and commerce because it is a necessa ry instrumental role in the check and balance system that guarantees that the participations of the gild, the investors and the everyday be protected.The briny idea behind the part of Enron Corporation is its managers deviance from these paradigms due to burlesqueulent intentions, and because of this, investors and the worldly concern in general placed Enrons managers and point executives as the one who erred and the ones who are roughshodly liable, starring(p) to one of the close to controversial debacle in Wall high itinerary history.Enron willingly or unwillingly, knowingly or unknowingly kept analysts, investors and other mint from the business industry outside and in the dark. virtually of their actions made them accountable according to the letter of the jurisprudence while some can interpret the absolute fiasco as a mere case of unequal to(p) and heavy-handed managers.The partnership and the role of these partnerships and the hardship to see how it will w ork out in the farsighted run is one of the bountifulgest mistakes of Enron and its managers along with i5ts give nonice to inflate its reported profits and manipulate its profits, and at some extent the managers knew of that this move was a dominance mistake but the earnings are comely to tempting for them non to wager and give it a try, providing Enron suddenly with a trend to hide the rightful(a) amount of its debts through these partnerships with companies who are masses and managed by the same executives found in Enron (Rouleau, 2002).The managers mistakes are assessed utilise two perspectives eldest, their mistakes that contributed to the d bearfall and worsening of Enron as a confederacy, and moment, the mistakes that they made that lead to the conviction of the twist charges that were slapped on them. What did they do wrong? Many.Just for starters, smith (2006) wonders roughly the foolhardy risk of Enron in booking profits exploitation means which are con sidered as generally volatile, regretful and perfectly lawful and legal this alongside Enrons racking up of mark-to- securities industry gains, a steady real-cash influx establish model for accounting, as reflected on the confederations craft book which do not reflect the use an accounting system which is based on the flow of actual bullion wish the accrual system,CRIMINAL LIABILITIES The mistakes of Enrons managers are reflected on their unlawful records as their miscalculated mistakes led them from blue chip executive managers to criminal convicted felons, which whitethorn have cast waking on the guilt of certain crimes of the Enron managers but was ineffectual to bring to light fully other headstone details.And by 2006, metalworker (2006) still considers that it isnt clear how much Enron made or lost off its vaunted energy-trading, energy-services and wideband units or the extent of the earnings of Enron over what Smith considers as the exploitation of the California el ectricity market during the 15-month crisis which started in the spring, year 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 inside one company, it is the perfect recipe for an impending fiscal crisis. To be able to analyze the mistakes of Enrons managers that lead to the better of the company, it is classic to take a look at two things the crimes for which every manager was accused of, and for the aver crime that they made but were acquitted from.The oversight and the managers were, after all, responsible for letting Enron be dependent on constitution trading gains, which, according to Smith (2006) actually had little real cash devoted to them and so vulnerable to credit calls that made it incapable of riding out a crisis (The Wall Street Journal, pA9), something which is not very much explored since the trial center on the liabilities of the leaders and m anagers who kept on insistence throughout the trial that Enron was merely a victim to a run on the bank. Smith, A9). in the lead making a scrutiny overall individual mistakes by Enron managers, one of the mistakes of the board of directors should be mentioned since it was symbolical to the law-bending and law-twisting nature of doing business inside Enron that put them in this mess in the first place.This particular accident which symbolizes the many other similar erratic actions and costly mistakes made by the board of directors is about the age when the board of directors opted to waive the aspect of conflict of interest and allowed Enrons very own Chief Finance police officer Andrew Fastow to head a business that is directly in dealing with Enron since the board of directors may have seen the merit, put forwardd temporary, of the strategy that allows Fastows LJM to acquire by buy out Enrons assets which it considers as underperforming, in truth the company of Fastow is n o more than a smokescreen so that the debt of the Enron is screen and the profit improved on report card. The most portentous person and Enron manager who made the most sexual relation mistakes en route to the downfall of Enron is no other than Kenneth coiffure.Others were exactly when a notch lower than perplexs stature in the mis worry department, and these allow in others like Jeffrey Skilling, Greg Whalley, Mark Frevert and Andrew Fastow they may or may not be include in Lays excuse 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 career and the future of Enron in alter for whatever pecuniary gains they experienced resulting from under victorious fraudulent actions and strategies while inside the company and holding key positions in Enron. Lay faced el purge criminal charges as an aftermath of the Enron scandal, all of which he pleaded not shamed.During the sentencing, Lay was found by the jury culpable of securities and cable fraud. This reflects Lays two main mistakes which he made throughout his Enron career 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 unfitness to protect himself for worst case scenario, whether or not he is truly guilty of criminal actions. Another managerial mistake of Lay is his argue of support and trust to the operations of Lou Borget, who was subsequently convicted of money laundering. Lay was notorious for undertaking contestable and dusky workings that are hardly transparent to those who request to see and understand it. tied(p) in the lead his Enron days, Lay was always full of suspicious and strange actions, like how he still managed to apply Internorth in spite of the feature that it was his nonaged company which the Internorth brought and how insurance companies point to Lays questionable transaction in foreign countries like Peru where Enron formerly do business in. This resulted to Lays career being capped with losses, gross sales of what is otherwise considered as a very productive operation, employee lay-offs and curious partnership deals which analysts consider as Lays way of hiding debt. If Lay is synonymous with shady accounts, questionable proceeding and strange partnership moves, Skilling seemed to be follow by a curse which is safe as bad as that of Lay failed business operation. Skilling join Enron in 1989. Prior to that, his career was inside a banking institution, the First City 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 human error positionor, wherefore he was misled and mingled at least(prenominal) 19 quantify, the same number of times he was acquitted for wire fraud and securities fraud. Even with the situation that it is nigh to im possible for Skilling to have an excuse for such number of instances pertaining to erroneous but not catty managerial actions inside Enron which can prove that he is innocent after all, his capability as a net layer manager will be put to question next, as well as the authority and prudence of those who hired him since Skilling, after all, is close to being 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 give tongue to to have committed securities and wire fraud.This is the case of someone stupid being talented enough to land a position of power, something which is not just convincing and realistic enough as it was plain dumb. Regardless, 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 monetary problem but to provide a mat un der which Enron managers can sweep the dirt when business visitors and investors come in for a visit. This is true with the case of Fastows creation of the so-called off-book entities. Even forwards Enron crashed, Fastow was already showing the company how he is mistake prone. Example of which was the 1996 job that he bungled, describe by Barboza and Schwartz (2002) in detail Fastow as tight fired for the poor mess job he did running a retail unit that aimed to put Enron into challenger with local utilities around the country (The New York Times).The same poor sense of long term outlook despite the innate financial wizardry inside Fastows head led Fastow to create an escape for Enron when its Calpers interests are not being addressed to as planned and expected by Enron his wifes family posing as outside investor and a low level Enron employee who was promised a hefty 10 million profit, the use of Chewco as the hiding place for Enrons debts and as a way to help in the inflation o f Enrons profits which were both impossible in the first place, .Again, maybe Fastow was pure after all of the crimes stacked against him after the Enron collapse but the one sure thing is that despite his intelligence, he committed too many mistakes that webbed him in a web and be clothed up in a series of manifold transactions that ultimately 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 traffic 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 exercise 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 John 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 follow 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 as well reveal little things that help compound the maturement mis focussing of Enron and made the fall a bit faster. The mistakes of the Enron managers can besides be stacked together in either of the two categories financial management failure and poor people management.For now, the idea that the company may have been sabotaged directly behind fraudulent intentions from the top executives will be put asunder in the name of management strategy assessment, and also because of the fact that common sense business dictates that no business entity o r individual would risk construct 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 top 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 but proved.Simply said, Enron top establishment made big time mistakes peculiarly 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 hithertotual conviction. distressing pecuniary and Overall Management Despite the fact that companies are indeed legit, it is difficult to prove that speed of light percent 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 hustle and bend the law h ere and there, and the reason wherefore some of them are not caught is because they are careful and good 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 good enough to lift the good financial position of the company and they were not able to balance out with good management maneuver and strategy whatever 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 still guilty of hiring incompetent individuals which they used to fill in key positions since none of them were capable of salvaging what was left of the fast sinking company. Financial fraud is often a team 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 Enron inside the trade and stock trade landscape 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 personnel 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 tale of the stock harm of Enron says it all before the crisis, Enron shares stood at 90 US dollars by November 21, 2001 the stock price of Enron is down to just seven US dollars. A week later the price was down to 0. 61 US dollars as the trading day closed along with the drug withdrawal of Dynegy Incorporated from previous deals with Enron and the awarding of the junk spot rating to the co mpany.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 jillion US dollars at the close of the year 2002, an amount which cannot be cover by the companys available cash at that time, the decimation of quintette billion US dollars in just litre 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 figure of its financial behavior is reeking of the foul olfactory property of poor management the big third quarter loss followed by the companys announcement that it has actually exaggerate 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 Enro n 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 pithy term losses which they may have failed to presage or foresee in the first place. The only thing it appears they do best is confuse the company, confuse the public and in the end confuse even themselves that even when they wanted to, they cannot explain to the public, curiously to the unsweet and to the investors, what is really going on inside Enron.Public say-so Credited to the faults of the Enron managers is the fact that the companys managers were uneffective to convince the investors in the time of crisis that everything is being do to create or assert stability. The investors were not delay 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 no t 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 credibleness Another important and noteworthy fault that the Enron managers, particularly Kenneth Lay, committed is that they allow their credibility 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 different ways that merely exacerbated the situation and compounded the evolution negativity of the people towards him owed to his being overly sha dy and secretive of the many aspects of Enrons operation and financial status.With the breaking of the credibility of the top management tier 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 social unit future in it, but because Enron managers themselves are creating inter-personal clash between them and those who are pushing for answers to unresolved questions. This attitude is reflective of how Enrons top management people like Skilling treated investors who are merely label for transparency by asking balance sheets and fine earnings and was instead treated with expletive course over a conference call.Breaking of Ranks During Enrons financial battles, one of the aspects that greatly crippled them as an fundamental law is the massive breaking and falling apart of their own ranks. In any battles corporate or not it is imp ortant that managers and top tier executives show a united front, especially when it comes to addressing the public and providing the assurance that everything is alright, and that whatever minor problems are being addressed nowadays through the unity of the top management brass. In the case of Enron and its managers, it is either top brass people are leaving or they are simply being replaced during the most critical part of the companys financial battle when senior and long time veterans are expected to hold the reigns and maintain control.