Enron is for instance reported to have been inducing problems in transmission of electricity in order to gain more revenues as it posed to solve the unreal problems.Īccounting malpractices such as “reduced tax payments, inflated incomes and profits and inflated stock piece and credit rating” (Tesfatsion 1). The company was also characterized with high level of dishonesty in the delivery of its services and goods to its consumers. It is actually this embezzlement that led to the company’s insolvency (Laws 1). Money that was meant for use on the company’s activities and interests as well as those due to the company’s employees was misappropriated by the company’s top brass. As people were busy investing the company, the management was on the other hand looking for avenues to channel the company’s finances into pockets of individual executives. The major issue that faced the company was however the embezzling of funds by the company’s executives. The company for example posed an energy crisis in the state of California in the year 2000. Apart from intentionally concealing its true financial status, the company also engaged in practices that were fraudulent in nature. These increased supposed investments were embezzled by the company’s executives rather than being put into the company and further misrepresentations made. As a result, the unreal profitability status of the company stimulated its then existing and potential investors into putting money in the company. The company was then reported to have a high level of misrepresentation of its records to its investors and potential investors. The application for deregulation by the company seems to have been a planned move to help it conceal its malpractices that was to follow the grant. Information about losses and debts by the company were not fully reported portraying an untrue status of the company.Ĭonsequently the accounts, which were presented by the company, continually attracted more people to the company in the form of investors. Under the deregulation, the company’s “executives were permitted to maintain agency over the earnings reports that were released to investors and employees alike” (Laws 1).Īs a result of the deregulations, Enron was able to make biased representations of its records to parties who could be interested in such data. This meant that the practices and records of the company were exempted from scrutiny that is normally done over business entities. The company started by ensuring that it was not under regulation by the government. These practices were for a long time concealed from the public and the company’s stake holders such as its investors. The collapse was a result of a long time venture into unchecked practices by the company through its executives. Problems encountered at Enron CompanyĮnron Company was characterized by a number of problems in the form or malpractices that led to the eventual collapse of the entity. The paper will then analyze the problems and then look into organizational behaviors and theories that affected the company. The paper will look into the issues that faced the company leading to its collapse. This paper seeks to discuss organizational theory with respect to Enron Company that was forced into collapse. Organizational theory ensures that issues facing an organization are resolved and responsibilities undertaken. Organizational theory refers to the study of organization with the aim of identifying themes into an organization’s objectives. The major cause of the collapse of a once prominent company was its selfish leadership that disregarded management’s elements such as organizations theories and behavior leading to inappropriate culture and ethics and practices. The firm was characterized by malpractices in its administration that led to embezzlement of funds by top officials and a subsequent accounting cover ups. Enron Company experienced a crisis to its collapse in the year 2001 which was culminated by application for bankruptcy.