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The Decline and fall of Enron

The merging of Enron of InterNorth Inc. in Ohama and Natural Gas Co. in Houston in 1985 formed the Enron Company. Following the merging, the company was rebranded to energy trader and supplier by the chief executive officer (CEO). Enron took advantage of the deregulation of energy which allowed companies to predict the future prices of oil. Consequently, Enron flourished and at the end of the 1990s its shares were its shares were worth $90.75. However, by December 2001, the company was declared bankrupt and the shares worth had declined to $0.26. Its fall affected thousands of employees and strongly shook the Wall Street.

Many economists believe that the exposed criminality in Enron that was admissible in the court of law was the cause of the decline and fall of the company. However, the true cause of the fall was selfishness by company management that applied some legally acceptable half-truths including equating value to shareholder value, the view of a man as economic man, the view of the society as a rising tide of prosperity and the view of leadership as heroic.

Worldwide, there has been a belief that every man is ‘economic man’. Through this belief, man has grown to be self-centered obsessed with increasing personal gains at the expense of others. The belief of economic man brings a wedge of distrust into society (Mintzberg, Robert and Kunal 67). Everyone can only do things for themselves and not for the society. This kind of individualism leads to failure since we are living as individuals but in a social setting. Companies must contribute to the development of the society to enhance their development. Disconnecting from the society will lead to their failure as they operate in a social space.

Establishment of the corporations was meant to benefit the society. However, the rhythm has changed to benefit the shareholders disregarding all other stakeholders (Mintzberg, Robert and Kunal 67). Employees bear the greatest pressure in creating the economic performance yet the large share of the profit is divided among the shareholders. Consequently, the employees feel demotivated to work and disconnected to the top management leading to poor productivity. This eventually results in company fall.

In many corporations, the shareholders are passively creating a need for heroic leaders. The chief executives are employed as the representatives of the shareholders, and in return, they are rewarded huge amount of money for the performance on behalf of the entire enterprise. Supporting this act is the assumption that equates the chief executive to the enterprise and deemed responsible for the entire performance (Mintzberg, Robert and Kunal 67). In an attempt to fit the heroic images, the chief executives promise grand results at the expense of the other employees. Heroic leadership leads to disconnection of the top leaders and every other employee. Lose of connection discourages teamwork and self-motivation leading to eventual fall of the corporation.

An effective organization is considered to be lean and mean. It has the meaning that the company should do more with less and should achieve a win-win situation. Simply, it means lower costs, increased productivity, happier customers, and flatter structures (Mintzberg, Robert and Kunal 67). Through the application of the lean and mean principle, many companies have laid off many employees in an attempt to minimize cost while optimizing profit. This has resulted in burned-out managers, disgruntled customers, angry workers, and quality loss. Reduced job security has resulted in a feeling of betrayal among the employees and hence reduced productivity in the long run.

There is a tendency of every individual wanting to prosper in the society. There has been rhetoric by those in high position that everyone prospers in a selfish economy. However, the saying is meant to fuel their selfish motives by the rich at the expense of the poor. Prosperity has to be both economically and socially and cannot be measured by an increase in economic values only (Mintzberg, Robert and Kunal 67). Economic progression coupled with social regression leads to failure of corporations.

The deregulation of energy market became the turning point of the Enron Company. Due to this the company flourished and by 1990 the company had reached its peak. However, this was followed by a drastic fall and by 2002 the company was declared bankruptcy. The fall of Enron caused havoc in the entire Wall Street. Many economists could not understand how such a big company could collapse overnight. However, the failure of the company started soon the company adopted policies that self-centered without considering their sustainability.

Works Cited

Mintzberg, Henry, Robert Simons, and Kunal Basu. “Beyond selfishness.” MIT Sloan Management Review 44.1 (2002): 67.

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