This paper will identify the failures of the management and leadership of this company, how correct and positive organizational behavior and leadership of the management team would have effected the configuration of the now disgraced company. Chron. com, 2009)Enron’s Failure as a CompanyThe team of executives at Enron wanted to stablish a company that would raise funds for the shareholders. In spite of this, the discovery of lower stock prices made the team take aggressive measures towards their accounting methods. In order to make the companies shares more pleasing, the team of executives counted on a boost of new capital funds and at the same time, cover up any risk to new backers. After Enron started the new accounting process, the necessity to continue the scam amplified with each financial year.
Regardless, the company wanted to keep advancing forward. (TIME Magazine, 2009)The Failure of the Companies LeadershipDuring the duration of Enron, the corporation’s governance did not implement their responsibilities. The Audit Committee should have been judgmental on the work of the auditors, but due to the continued increase in stock earnings, the call for an investigation within Enron’s accounting practices were not founded. The Board was lenient with supervising management and accepted information from the executive team at face value. The Board was content with Enron’s success. TIME Magazine, 2009)The Failure of the Companies Managementunfortunately, the employees of Enron were caught up in the downfall f the company and suffered also. The corporation had over 100 employees in the accounting and legal staff. It appeared that all employees were working with support of the managing team, which in turn was backed by the executives. As with management and leadership, the methods that the employees used were not in doubt because incentives were high. Employees were receiving big salaries which were helping to hide the big corporate debt and increase any earnings reported.
The methods that were being used. (CNN Money. com, 2009)Corporate Structure and Enron’s ImpactCustomarily, with some state law restrictions, the structure of orporate governance has been handled between managers and shareholders privately. However, the Sarbanes-Oxley Act (SOX) of 2002 has made the behavior of governing structures a focus of federal law. The Code of Ethics, which was formerly part of management prerogative, is required under SOX. As a result of the scandal at Enron, SOX provided methods for equalizing the authority among the top management of corporation and the board of directors.
Even though SOX did not have the know-how to reduce the present prerogatives and discretion in how management conducted business dealings, the main objective was to aid as a estraint, nonetheless, it could not stop the deceit from management. In order to avoid management fraud, the practice had to be a shared vision by all parties involved, which included the board, top level management, employees and shareholders. Under SOX law, “top management has to certify the accuracy of the financial reports and make certain disclosures about the controls and procedures in place to avoid fraudulent financial reporting.
Even a code of ethics for senior corporate financial officers is now a requirement of the law. Such methods include internal control, corporate governance, and code of ethics. ” (Sarbanes-Oxley Act, 009), (Chron. com. 2009)Corporate governanceunder the new structure the board would maintain and develop a business structure that would make certain cooperation and collaboration between employees and management will pursue objectives and goals of the organization instead of what management wants to do. (CNN Money. om, 2009)Code of EthicsUnder the new structure, Management would be responsible for the code of ethics and to encourage the significance of corporate morals and standards of ethics. By doing this, will push management to operate in a leadership manner and not Just overseeing internal control systems.