Republic of the Philippines

NUEVA ECIJA UNIVERSITY OF SCIENCE AND TECHNOLOGY

College of Management and Business Technology
Atate, Palayan City, 3132

TERM PAPER
IN
FINANCIAL MANAGEMENT
ENRON: THE SMARTEST GUYS IN THE ROOM

SUBMITTED BY:

Beltran,Abbie D.
Collado, Jelsey
Coloma, Kevin
Gante, Mabel
Marquez, Mac Joel

SUBMITTED TO:

Mrs. Lyka Mae F. Ibarra

December 9, 2023

The story began with 2 merger companies at year 1985. The Houston Natural Gas Corporations,

and InterNorth Inc. The CEO of HNGC, Ken Lay continued to be a CEO of ENRON. The
documentary film tells the greed in Corporate America that is always exposed after the fact. In a

year 1990, Ken Lay hired Jeffrey Skilling, also one of the partners at Mckinsey Company which

is the consulting company advising of ENRON, later Skilling became an Architect of accounting

Technique. In 2 years of working at ENRON, Skilling formulates an accounting technique called

MARK TO MARKET that can adjust value of assets on Balance sheet from its historical cost up

to fair market value and capture the difference as gain/revenue.

The said technique was approved by SEC in 1992. At year 2000, ENRON entered to a deal with

Blockbuster to provide service-wide on demand services. It allows the BB to streamline movies

online and the duty of ENRON are to provide Broadband and Internet Service but unfortunately,

led to issues that makes the deal, unenforceable. And a year after, ENRON declared bankruptcy.

The failure of Enron undermined confidence in financial markets in the United States. It caused

substantial damage throughout the Financial system resulting from multi-hundred-million-dollar

write-offs from exposure to Enron. This situation clearly underscores a very important weakness

in the behavior of corporations and financial markets ––the exploitation of conflicts of interest.

This demonstrates the vulnerability of financial markets and the need to restore integrity to the

reporting system and to address issues associated with corporate accountability.

ENRON highlighted how important are the transparency, accountability, and ethical leadership

in corporate governance. The company’s corporate culture, driven by pressure to meet ambitious

financial targets and a lack of checks and balances, led to unethical behavior. The implementation

of a strong audit committee may lessen this situation by offering supervision and guaranteeing

the accuracy and transparency of the financial statements of the business.

Eventually, engaging in fraudulent activities may result in monetary losses, productivity losses,

hefty fines, and additional penalties that may include jail time. When addressing certain immoral

situations, it’s critical to demonstrate value theory and look for alternate selections.

From our point of view, Auditors and CEO had a personal intention that led to such crime and

results to mass disruptive of personal lives and economic decrease. People should have same

goal, vision, mission that are lined to the company’s mission, visions and goals. With the

ENRON scandal to Financial Management, large businesses should know how to hire, evaluate

and should learn the financial structures within and outside the business. Reading and analyzing

financial statement will determine if the companies are doing well or not and it enable companies

to create an inventive strategy that will help them to cope up problems. Hiring a skilled and right

people to a specific position especially to the essential positions should be critically evaluated

because they will be handling major job, it must be an above professionals.

In every company, it’s important to promote ethics and integrity in all aspects. Company officials

should be Honest and Transparent to company and the public. What happened to Enron

Corporation may serve as a lesson that a company should have Principles of management that

will serve as a guideline for management action. The Authority should not be abused rather used

to make a decision and responsibility to make the company in a better state. For the fraud just

like the ENRON executives did, always keep in mind that discipline is important, to keep a

corporation running properly. Equity and fairness that come from a combination of kindness and

justice will result in passionate and loyal service.

In the business world, competing with numerous other organizations who are fiercely rival to

your own can be extremely difficult at times. While being competitive is a good thing, engaging
in dishonest business practices will not help a company expand; instead, will cause company to

fail because of its inability to fill the gaps left by its weaknesses and the rising number of

fraudulent cases. You can gain recognition for your perceptive management of the company’s

overall operations by taking steps to resolve its problems through a morally righteous and fair

procedure. This will enable us to comprehend how a firm can grow and prosper and how it can

be advantageous to all parties involved, including potential employees.