Enron: White Collar Crime

anahl

Introduction to Criminology

Writing Assignment #2: “Enron”

I

Enron was once a successful energy company in Houston, Texas. Through an intense culture of risk taking, a drive for profit over the well-being of people, and a structure that fostered employee rivalry; the façade of a successful business collapsed from under its traders and executives. Enron’s negligence is a lesson in the monetary and personal damage that white collar crime inflicts. Three factors contribute to our understanding of corporate crime. The first of these factors is the culture of the company. The culture within white collar crime refers to beliefs, behaviors, values, and attitudes of the organization and the resulting employee’s performance. The second factor

Jeff Skillings, CEO of Enron, produced much of the culture within the workplace at Enron. Skillings favorite book was “The Selfish Gene”, which is based on natural selection, competition and exploitation. The basic ideas of survival of the fittest were adapted within the work place and produced a dog-eat-dog atmosphere. Skillings once said, “Money is the only thing that motivates people”. The ruthless culture of competition that was created further fed into the greed of the company. Employees and executives alike were willing to step on each other’s throats to get ahead because that was what was expected of them. Another aspect of culture that Skillings influenced was the glamour in risk taking. Skillings would take high level executives of Enron and clients on dirt biking trips. These trips were described as perilous and often resulted in broken bones and busted lips. Amanda Martin, an Enron executive, said “the trips fed the macho culture of the place”. The trips influenced the risks taken on these trips directly influenced decisions made in the workplace as traders often gambled excessively and

The competitive structure encouraged traders to act unethically. Mark to Market accounting and Hypothetical Future Value were accounting techniques used by Enron. At the time, these techniques were new to accounting. The company used faulty accounting strategies such as Mark to Market and Hypothetical Future Value which made way for manipulation through subjective predictions of future profits being booked as if they were current. These strategies created the largest façade of success from Enron. Another structural aspect of Enron that was used was called the Performance Review Committee, or “Rank and Yank”. The process included grading employees on a base of one through five. Even if all employees were performing well, 10% of employees had to be graded as a five and then fired. Skillings referred to this process as the most important process they conducted as a