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 ...view middle of the document...
On the other hand, we also see that shareholders could bring an opportunity since they are central to the restoration of Enron. They could decide not to file lawsuits and continue to support and help rebuild the company. This is not an easy task considering that the company broke their trust.
Other significant stakeholders that deserve priority are Enron’s employees. The employees present threats to Enron in two ways: they can form coalitions to exercise their legal rights, and they can also leave the company. They will most likely sue the company as they have lost vast amounts of their retirement savings (Moscoco and Deans, 2002). The urgency in this situation matters a lot as some employees are reaching their retirement age. When it comes to employees leaving the company, it is important to note that these employees have the necessary skills and are essential for the business to succeed. Here is where we see the opportunity. How is Enron going to recover without them? That being said, Enron has to do something to retain its employees.
Lastly, the third stakeholder is the U.S. government, especially the Securities and Exchange Commission (SEC). The U.S. government has tremendous legal and political power. They have the ability to sue, penalize, and create special regulations against Enron. Because the government’s interest is to protect the public’s interests, it is likely that the government will sanction Enron for its scandal (Lawrence & Weber, 2014). Nevertheless, we still see a possibility for Enron to pull the government to its side. Enron could argue and prove that shareholders and employees are motivated to rebuild the company to regain what they have lost. The government will then hopefully consider supporting the re-establishment of the company.
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...