Describe how Enron could have been structured differently to avoid such activities:

Structurally, the company was simply too complex. According to the article “The Fall of Enron,” by Paul M. Healy and Krishna P. Papelu, the company diversified its business after a consistently rising stock value that lasted nearly a decade. During this time, Kenneth Lay and others in the company saw to it that there was a constant expansion of the business. As Enron’s stock value rose, it expanded as a company, dipping in to new financial markets as well as new products. According to the article, the reporting of finances was based on the need to project profits in the future in order to fund different arms of the company.

The complexity led to mismanagement by the officers in the company. In order to prevent the subsequent problems, the company structure could have been streamlined in order to avoid the mess that became the accounting situation for Enron. Different wings of the company operated as separate entities, with separate leadership. In addition, the wings had separate goals and accounting. However, this accounting was based upon reliance of accounting in other wings of the company, which ultimately led to errors in profit reports and other areas (Healy and Papelu, 2003).

The process of expansion could have been carried out in a way that simplified and disentangled the various branches of the business. Sister companies could have been created with accounting processes laid upon the company itself. Rather than one wing’s contracts and projections of future earning being based upon those of a separate entity, those projections. Another solution would have been to centralize leadership. Though that would have placed a very complex company on the shoulders of fewer people, it could have prevented some of the accounting mistakes that caused so many of Enron’s problems.

Discuss whether Enron’s officers acted within the scope of their authority.

The key to the question of Enron’s officer authority is to discuss the adherence of the company to the principles of business. Obviously, people who committed fraud or willfully misled others are guilty of crimes. However, it seems like an interesting point to consider whether Enron’s business model was within the scope of the officers’ authority. Enron’s focus on revenues instead of profits, and the company’s shift to energy trading could be seen as a smart move only through the perspective of raising stock prices. When the focus shifted, it was the shifting scope of Enron’s officers.

The departure lied only in the misconduct. Enron’s officers were responsible for keeping the company successful. Though they may have failed, it seems that it was well within their authority to expand the complexity of the company and to enforce a corporate culture that would lead to long term success. In continuing on a path toward destruction, Enron’s officers were outside the scope of their authority because, instead of providing for the company, they were providing for themselves and the other officers by creating the illusion of prosperity.

Describe the corporate culture at Enron:

The problem of complexity, along with the subsequent misuse of accounting procedures, led to the illusion of a successful business model. According to the article “Red Flags in Enron’s Reporting and Key Financial Measures,” by Duran and Bufkins, Enron’s focus on stock prices caused members of the corporation to ignore warning signs pertaining to the problematic accounting within the company. As long as prices were up on the stock, employees and leadership were content to allow the practices that raised the prices. This corporate culture, along with a compensation plan that was set to reward the behavior, contributed greatly to the problem. Many would-be whistle blowers were likely silenced by the promise of money.
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