Essay about Enron’s Stakeholder Impact Case Analysis
Widely known as the champion of the energy industry, Enron is suddenly faced with a corporate crisis in the form of a scandal. This scandal involves not only Enron’s accounting practices but also its corporate governance and culture (Lawrence & Weber, 2008). This report will recommend some potential strategies for Enron to move forward from the scandal. To do this, we must incorporate stakeholder theory, which “argues that corporations serve a broad public purpose; to create value for society” (Lawrence & Weber, 2014, p 6.). This means that Enron must take responsibility for the scandal it created and take actions to regain its stakeholders’ confidence. To accomplish this, we will first identify and analyze Enron’s primary …show more content…
To move forward, we need to address some critical problems within Enron. They include Enron’s accounting practices, aggressive and profit-driven culture, and corporate governance. There is a lack of safeguards as well as a lack of checks and balances regarding Enron’s accounting practices and its corporate governance. Arthur Andersen served as both internal and external auditor for Enron, which posed conflicts of interest. Furthermore, Enron’s Board of Directors seem to be ‘subjective’ rather than ‘objective’ due to their business or personal relationship to the chairman and prior CEO of Enron, Kenneth Lay (Lawrence & Weber, 2008). All of these problems ultimately led to the scandal that affected all of the primary stakeholders in big ways.
Enron’s accounting practices is the first identified problem. Their shifting of debts and manipulation of revenue led to the creation of the false financial statements that the shareholders and employees relied on. The government, especially the SEC, played a role in this and took heat from the public because of their lack of regulation and oversight (Lawrence & Weber, 2008).
The corporate culture is the next problem that needs to be addressed because Enron’s profit-driven and corrupt culture assured employees that the company was not doing anything wrong. This makes the normally