The Smartest Guys In The Room

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Task 2. Using points from the discussion at the end of the Week 2 lecture on Enron: The
Smartest Guys in the Room (2005) movie, prepare your answers to the following.

1. What were the individual factors that contributed to the failure of Enron? Briefly
explain two key factors.

There were several individuals, all of whom were senior members of staff that contributed to the failure of Enron. A corrupt corporation driven by greed and egoism caused an avalanche of illegal and unethical business practices that attempted to cover up Enron’s financial debts and corrupt record keeping operations.

Kennith Lay, the founder of Enron set the foundation of the businesses unethical practices in 1987, two years after the business was founded when an audit …show more content…

What were the organisational factors that contributed to the failure of Enron? Briefly
explain two key factors.

Jeffery Skilling, Enron’s second CEO has one condition upon employment, the business was to implement a ‘market to market’ accounting system. This allowed the business to record potential profits on certain projects immediately after the contracts are signed, regardless of the actual profits it would generate, giving the appearance of being a profitable company (Gibney, A, 2005, Enron - The Smartest Guys In The Room (2005)).

Andrew Fastow, the companies CFO created a network of shell companies that were used to hide Enron’s increasing levels of debt. “His job was to coverup that fact that Enron was a financial fantasy land” (Gibney, A, 2005, Enron - The Smartest Guys In The Room (2005))

The companies market to market accounting system failed them as they began to account for more and more profit that wasn’t being generated in self interest. Fastow’s network of shell companies was an attempt to cover up the business’s short comings but ultimately contributed to the speedy downfall of the company as it’s debts

3. What were the social factors that contributed to the failure of Enron? Briefly

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