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Question: Discuss about the Case Study of ENRON. Answer: History of ENRON The origin of the company Enron is dated back to the year 1985 in the form of an interstate pipeline firm, which happened out of the legal union of Omaha based InterNorth and Houston Natural Gas (Cbc.ca, 2017; Markham, 2015). The former CEO of Houston Natural Gas, Kenneth Lay became the Chief Executive Officer of Enron. Later on, the consultant of Mckinsey, Jeff Skilling, through his vision, wanted to change the pipeline industry to the gas industry. During his time, the company was straitening its operations of pipeline into a wider business in power supply. In the beginning, the pipeline had been extended to United States of America and then it was extended on a global scale, by completing a larger plant in the United Kingdom and contracting to construct a large plant in India near Mumbai (Markham, 2015 ).However, under the inspiration of Jeff Skilling, Enron started moving into new fields. In the year 1999, the company has launched its broadband service as well as its official website (Cbc.ca, 2017; Abrogast, 2013). The companys website had been used for the commodities, which were meant to be used for the trading purpose. The firm took the decision to build itself as a global leader in the hydro industry and bought a big water company in the United Kingdom. In the year 2000, the growth of Enron increased. However, from the year 2001, it has been reported by Enron that there has been a loss of $619 million, which is regarded as the first quarterly loss in the four years (Markham, 2015). Even in the late November, the stock of the company came down to less than $1, which lead to the loss of millions of dollars by the investors (Cbc.ca, 2017). There are certain mistakes committed by the company and therefore, in this context, it is important to investigate the problems took place in the company. Mistakes committed by Enron In a way, the company went bankrupt for the general reason that all firms go bankrupt. The company made investment in projects that had proved to be risky and as a result, the firm was not able to keep up with the obligations of debt of the company (Prebble, 2016). It has been pointed out that Enrons accounting abuse and policies disclosure such as accounting based on market to market, the SPEs utilization in order to hide debts and using not adequate capitalized subsidiaries in order to decrease the earning volatility are the vital reasons (Cbc.ca, 2017; Prebble, 2016). These are taken as an important cause of bankruptcy; these abuses are regarded symptomatic of a bigger problem at Enron related to identity crisis. The rapid expansion of Enron had run much ahead of the ability of Enron to fund it and in order to address the problem that happened in the year 2000, the company secretly created a complicated web of the off sheet of balance based on financing vehicles (Prebble, 2016). Its hard driving culture provided by the schemes of incentives, which had promised and gave delivery to the huge rewards to the outstanding performers in the compensation packages. The consequence was that in order to achieve results, the assaulting policies of accounting in the early stage were introduced (Cbc.ca, 2017). Specifically, the use of valuation market to market based on the contracts which were produced in large earnings artificially, disguising for a few years lead to the low profitability in the greater part of the business. This identifies that Enron was not generating the proper flow of cash while spending extravagantly on the policy of expansion and gradually it blew up dramatically and suddenly. The suspicions grew that the earnings of Enron were manipulated and in the late Summer, in the year 2001, the company has emerged that its Chief Finance Officer made himself rich privately at the expense of Enron (Cbc.ca, 2017). Responsibilities owned The leaders of Enron and their conflicting philosophies are responsible for the downfall of Enron. Before the resignation of Richard Kinder in the year 1996, the two individuals having different styles of leadership and management strategies and they were in the competition with each other for the favor of Ken Lay as to become a second person in the company (Bakan, 2012). The name of these two leaders is Rebecca Mark and Jeffrey Skilling. The conflict between Skilling and Mark became prominent after the resignation given by Kinder in the year 1996 (Cbc.ca, 2017). Mark continued to make her position strong and advance her asset rich strategy within the sphere of company, investing heavily in the projects of overseas like the Dhabol Plant in the country India and the Azurix operations in Canada, Britain and Argentina. However, for Mark, these projects failed to yield profits on a longer-term basis for the company (Bakan, 2012). While Mark and her employees were utilizing millions of do llars at Enron which were worth of compensatory advantages and benefits from developing these important deals, a few were aware of how these failed projects affecting the company badly through the growing indebt (Cbc.ca, 2017). Finally, it can be stated that the ideological conflict between Mark and Skilling along with the resignation of Rich Kinder, whose obsession with the cash flow levels at Enron helped the company in the black during the year 1990, as the primary reasons why Enron was bankrupted (Dollman, 2013; Swamy, 2014). The high level managers at Enron in both the camps of Mark and Skilling were taking advantages of the packages of huge compensation (Cbc.ca, 2017; Albeksh, 2016). The compensation structure at the company as a result gave birth to the culture of narcissism that gave rewards to the individuals such as Andrew Fastow, the chief Financial officer, for the creation of illegal schemes like Chewco to eclipse the mounting debt of Enron and ironically provided generous support for doing so (Cbc.ca, 2017). Learning Outcomes The scandal in Enron is the important corporate destruction in the USA since the failure of many loan banks and savings during the year 1980. The scandal demonstrates the need for the important reforms in the corporate governance and accounting in the country, it has also given lesson in terms of taking into account the ethical cultural equity generally (Siskos, 2014). The importance of the corporate ethics is regarded as a serious business. It is important to think the culture of the company and workings seriously. It has taught the people that it is significant to have the corporate ethics, which is regarded as a serious business, and it is significant to them in the writing format (Cbc.ca, 2017; Siskos, 2014). Enron is not regarded as a story of capitalism of the uncovered greed at the mind of the dishonest world of business and it must be properly guarded against any institutions and a vigilant populace (Choudhary, 2012). However, this is regarded as the lesson of fear. The deepe r lesson that the scandal imparted is the hope. This is the lesson, which is not only for stakeholders and employees, but also for the business (Cbc.ca, 2017; Albeksh, 2016). The Enron scandal not only describes about the danger involved while trusting the business, it is also about the business, which is necessary of being considered as trustworthy. Business always looks forward for the actual success and the actual returns, which includes the financial ones. Enron is not a victory for greed, but the firm is the failure of intelligence particularly, it is a failure to consider the critical role of trust in the success of the business (Shine, 2014). the business must believe that a relationship must exist where one partner always keens to take advantages and the other one is proved unsustainable. However, in the context of Enron, the trust was not there. The true success in the capitalist system is based on trust (Cbc.ca, 2017). Therefore, against this background, it is important to justify that the scandal of Enron focuses on the fact that trust is important to consider in the business, absence of this, would led to the deterioration in the business (Siskos, 2014). Recommendations After analyzing thoroughly the case of Enron, the most important recommendation that can be given to the firm is to welcome a strong code of conduct. Through the implementation of the strict policy of conduct little room is left for the firm actions which might jeopardize the firm, both ethically and legally. In addition to this, it is equally important to frame out a series of balances and checks from both third parties and in houses (Cbc.ca, 2017). Taking into consideration these important safeguards, they allow the management to be transparent, having concise understanding and the way the business is carrying forward its operations. The firm must have accurate and clear understanding regarding the practices of accounting. The use of Enrons market to market accounting system, which has allowed them to report their earnings supported by potential profit from the transactions of business, regardless if the firm collected the payments (Cbc.ca, 2017). If the company is having capability of having clearer understanding of the perfect system of accounting, the firm can establish a mind of transparency in their reports, which would further build trust for the investors in the public. The CEO of the firms must carry a strong character with them so that they can handle the entire business. They must not negatively affect the development of the business. The presence of a strong ethically bounded leader, who can think about the future of business and its development is necessary for the success of the company. References Albeksh, H. M. A. (2016). The Crisis of the Ethics of Audit Profession: Collapse of Enron Company and the Lessons Learned.Library Journal,3, e3205. Arbogast, S. V. (2013).Resisting corporate corruption: Cases in practical ethics from Enron through the financial crisis. John Wiley Sons. Bakan, J. (2012).The corporation: The pathological pursuit of profit and power. Hachette UK. Cbc.ca. (2017).The rise and fall of Enron: a brief history.CBC News. Retrieved 6 November 2017, from https://www.cbc.ca/news/business/the-rise-and-fall-of-enron-a-brief-history-1.591559 Choudhary, A. (2012). Mission" Trust".Academy of Strategic Management Journal,11(1), 101. Dollman, A. (2013). Narcissism in the Workplace and its Effects on an Organization.DSM-5, American Psychiatric Association, 696-670. Markham, J. W. (2015).A financial history of modern US corporate scandals: From Enron to reform. Routledge. Prebble, L. (2016).Enron. Bloomsbury Publishing. Shine, Y. (2014). Business Ethics: The Good the Bad and the Enron.TOURO ACCOUNTING BUSINESS JOURNAL, 50. Siskos, D. V. (2014).Detecting financial reporting fraud-Lesson learned by Enron Corp. SMC University Working Paper, 4-16. SWAMY, M. K. (2014). CASE STUDIES OF CORPORATE--RELATED FINANCIAL INSTITUTIONS PROMOTING SELFISH INTERESTS THROUGH MONEY LAUNDERING AND ASSOCIATED UNETHICAL-BASED BUSINESS PRACTICES.Journal of Financial Management Analysis,27(2).