Enron Corporation Analysis of the Company By: Heather Major & Amanda Walton OL-125 Management

Background Company started in 1930 Was called Northern Natural Gas Co. Organized in Nebraska by three companies Federal Power Commission and Natural Gas Act of 1938

Background Continued 1947 introduced Northern to the New York Stock Exchange Many mergers happened within the 1940’s- 1970’s 1960 created two more subsidiaries, one later to become Enron Gas Processing Company Battle with Cooper Inc. in 1980

Some Management in History 1986, Interface was named Enron Top management shuffle concluded the look to Kenneth L. Lay as Chairman Divesting did not fit with long-term goals Problems from the start

Enron’s Business Theory Enron’s stated philosophy International and Domestic business Strong Marketing capabilities

Company flourished with Jeffrey Skilling as a top executive Skilling had much influence over CEO Ken Lay Revolutionized way gas was bought and sold-set up more like finance business High tech boom shifted them towards e- commerce and telecommunications conglomerate

Intense Hands on Laissez faire management style

Adopted a “growth at any cost” culture Skillings pushed this in order to stay competitive Caused company to override checks and balances “Losers fell by the wayside but victors stayed in the game….”

Enron’s downfall was not sudden Early 90’s: Obsession with bonuses and stock price Strange accounting tactics

In 2001:  Planned deal with Blockbuster cancelled  Revealed that they were owed $500 million by bankrupt California Energy Companies  3 rd Quarter Loss of $618 million  Overstated their net worth by $1 billion

Stock price fell Said error was due to complex accounting Restated earnings for past 4 years: $568 million less Creditors would not lend to them Lenders wanted payment

Compliant board of directors Lawyers, auditors and accountants turned blind eye Company tended to change overnight Culture, personalities, and practices

Aftermath Of Enron’s Collapse Tried to sell shares and specific businesses Filed for Bankruptcy in 2001 Stock hit “rock bottom” Arthur Anderson’s Disgrace

Alleged accounting abuses by Arthur Andersen Former and current employees sue for the loss of their retirement savings Alleged violation of federal pension rules

Prevention of Collapse Could have sold or had a joint venture in some aspects of Enron’s business Cut down on expenses when billions were being lost Could have not said anything regarding to stock prices/ management Could have stopped the projects that were not profitable

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