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Enron Case Study Analysis Essay Sample Get access to this section to get all help you need with your essay dissertation for proofreading college esl hypothesis sites educational issues. Enron Case: A Background. Enron was ranked in the USA’s Fortune top 10 list of companies, based on its earnings in 2000. Its published accounts for the year ended 31 December 2000 showed a profit of $979 million and there was nothing evident to alert shareholders to the imminent disaster that was going to disclose over the next year or so and make Enron the largest insolvency in US history. Enron’s difficulties related to its activities in the energy market and the setting up of a series of ‘special purpose entities’ (SPEs). Enron used the SPEs to conceal large losses from the market by giving the appearance those third parties covered crucial exposures. Nevertheless the SPEs were really nothing more than an extension of Enron itself and so Enron’s risks were not covered. Some of the SPEs were used to transfer funds to some of Enron’s directors. In October 2001, Enron declared a non-recurring loss of $1 billion and also had to disclose a $1.2 billion write-off against shareholders’ funds. Later, Enron made known another accounting problem which reduced its value by over half a million dollars. It looked as though a takeover might be on the cards from Dynegy, however in November announcements by Enron of further debts led to the takeover bid falling through and in December 2001 Enron filed for bankruptcy. In retrospect, it seems that the directors were not interrogated closely enough about the use of the SPEs and their accounting treatment. What has become clear is that there was some concern in Enron’s auditors—Andersen, about the SPEs, and Enron’s activities. Andersen failed to ask the directors hard enough and Andersen’s own fate was sealed when some of its employees shabby formalities relating to Enron, hence eliminating crucial evidence and contributing to the failure of Andersen which has itself been taken over by different rivals. The Enron case focuses upon the principal need for integrity in business: for the directors to act with integrity and honesty, and for the external audit firm to be able to ask probing questions of the directors without holding back for fear of possibly offending a beneficial client. This latter situation is aggravated when auditors receive large fees for non-audit services, which may well exceed the audit fee itself, as a result endangering the independence of the auditors. Enron also highlights the need for independent non-executive directors who are qualified enough to be able quote raven writing desk plaques a like ask searching questions in board and committee meetings to try to make certain that the business is operated properly according to the rules. The calamity of Enron Corp. is quite a remarkable case to study for a legal expert however it caused a lot of trouble to the world. It has long been said in the United States that it is impossible to fully prevent frauds by those who intend to deceive. Since 1925, efforts have been made to find deceitful market manipulations, although stock market scandals continue to take place. The recent Enron case took place in spite university marksheet 10 ba punjab the fact that the company had been under the management of external professionals. Much of the public controversy about Enron focuses on how Enron misused accounting and disclosure policies. In a nutshell, Enron’s abuses in those areas included the following: Using improper or aggressive accounting and disclosure policies to hide assets owned and debt incurred by Enron through special purpose entities (SPEs); Using poorly capitalized subsidiaries and SPEs for “hedges” that reduced Enron’s earnings unpredictability on paper, in the face of many cases being dysfunctional or nonperforming in practice; and Allegedly engaging in “wash trades” with secret subsidiaries designed to increase trading revenues or mark-to-market valuations falsely. Initially, Enron’s abuses of those structures seem to have been driven more by a desire to manage earnings than by anything else. However as time passed, Enron used aggressive accounting and disclosure policies to “buy time” for itself. In particular as Enron moved into new markets in which its comparative advantage was more questionable (e.g., broadband) or in which Enron’s success depended keenly on the rate of government deregulation (e.g., water), Enron’s financial troubles amounted to “robbing Peter to pay Paul.” In other words, as Enron’s cash balances got lower and lower, hiding its true financial condition was the only way that Enron could maintain itself long enough to hope that its next big investment program would pay off. That might have worked had Enron stuck to markets in which its success with asset lite was more guaranteed. Regrettably, as has been argued, the firm’s end became certain once it decided to start moving into areas that moved away from its main business strategy. There is also the question of which Enron was in fact deceiving with its accounting and disclosure policies. Over the course of many years, one could say that Enron seduced investors, monitors (e.g., rating agencies and accounting firms), creditors, and even its own employees into believing that the firm was stronger economically than it in fact was through a mixture of aggressive marketing, cultural pride, and, in some cases, utter deception. Although mainly as the end of Enron approached, many institutions had begun to view the company with growing suspicion. By the time Enron failed, an unexpectedly large number of firms dealing with Enron commercially had come to fear that the worst for Enron might is approaching. Eventually, those who seem to have been the most cheated—and for the longest time—were Enron’s own employees, who, in contrast to other firms dealing with Enron, had more english in zebra reviews book and summaries to be essentially optimistic and were probably taken almost completely off-guard. Enron: An Introduction. By the time the Enron Corporation filed for Chapter 11 bankruptcy protection on December 2, 2001, in effect everyone with knew that things were not as they had once seemed in Houston. How could a company go from a market capitalization of more than $100 billion and being ranked fifth in the Fortune 500 list to bust within two years? How could a stock that had seen highs of nearly $90 per share become a penny stock in record time? How could the six-time consecutive winner (1996–2001) of Fortune’s “most innovative company in the United States” have got its own financial destruction? Furthermore more important, what can be done to make sure this never happens again? One must be careful, nevertheless, when defining “this” in the phrase “make sure this never happens again.” Not everything Enron ever did, in spite of everything, was unlawful, unprincipled, or even debatable. Indeed, what in fact caused Enron to fail is still subject to controversial debate. It is clear; on the other hand, that Enron did not fail because it was engaged in commercial and merchant commodity businesses (Culp et al, 2003, Part 1). Nor did a “rogue trader” or Enron’s use of creative and sometimes-complex financial contracts helping essay peer Enron to its knees. Nor, as a final point, did Enron’s corrupt financial activities—concealing its true indebtedness, lining the pockets of select senior managers to the detriment of shareholders, hiding major losses, and the like—cause Enron to fail. Enron’s financial fraud certainly allowed it to remain in business longer than an otherwise similar firm engaged in correct financial disclosures might have, however that is a question of timing alone and not causality. It is argued that Enron’s eventual financial failure most likely took place for the very same reason that WorldCom, Global Crossing, and many other firms at times have gone insolvent or run into trouble. To be brief, those firms all required the ability to identify their true comparative advantage. In some cases that meant Enron over invested in new markets and technologies that never took off in other cases it only meant that the company overrated the value that it could add. However is that something that new policies and regulations should strive to ensure “never happens again”? Or, as argued, is this aspect of Enron’s failure simply a proof to the fact that competitive markets are effective judges of success and failure? This study begins with an outline of Enron to stress that it was primarily an energy business that used an innovative “asset-lite” strategy that accounted for many of its genuinely successful years. A discussion of those businesses in which Enron failed follows since it is in those areas where Enron departed from the asset-lite strategy used in the energy business. The next section formally frames Enron’s asset-lite strategy in the context of viable economic theory. Standard “neoclassical” economic models do not explain firms such as Enron, and thus a more “disequilibrium-oriented,” or “neo-Austrian,” approach is required. The paper concludes by considering whether Enron’s failure as a business either offers lessons for other firms or provides a narrow-minded case for greater regulation. Enron Case: An Organizational Analysis. Neoclassical vs. Neo-Austrian Economic Theory. As well as providing an analysis of Enron’s business strategy through the lens of economic theory, this study points up the limitations of the traditional neoclassical theory of the price system for explaining entrepreneurship and innovation—terms that, regardless of Enron’s illegal and deceptive activities in some areas, however do describe that company in other areas. The neoclassical perspective views markets as existing in a stationary state in which the relevant knowledge about demand and supply is known; market prices are static, or given; and data are available to be used by individuals and firms. In this world without change, there is no need to ask how that stationary state came about. That knowledge just falls into the category of irrelevant past. Neoclassical economics does, obviously, also deal with change. It does so by using comparative statistics. For instance, people can consider of a quasi-stationary state in which changes in the relevant knowledge in a market are rare, and analysis of the full consequences is dealt with by evaluating and comparing the stationary states before and after changes in relevant knowledge take place. In the neoclassical world, prices act as pointer, guiding consumers to replace with goods for one another and producers to learn which lines of production to abandon or toward which to turn. In this neoclassical conception, the price system acts as a system of communication in which related knowledge is transmitted at once throughout markets that jump from one stationary state to the next. In the neo-Austrian, or disequilibrium-oriented, context, by contrast, Combe application Monkton college writing School essays market is considered as a process that is in a constant state of instability. In effect, there are no stationary or quasi-stationary states. In fact, progress hawkes login learning report about the existing and future state of affairs are always changing since the state of relevant knowledge is always changing. Furthermore with changing expectations, market prices are also changing. In effect, the price system functions as a network for communicating all relevant knowledge. It is also a discovery process that is in continuous motion, working toward creating unity and coherence in the economic system. The speed of adjustment and of the diffusion of knowledge in the price system depends on the scope and Sandy writing Friends steps in article School Spring an of the markets. As it relates to the discussion here, the full force of market integration is realized when both spot and forward markets exist. Indeed, the function of forward, or derivatives, markets is to spread relevant knowledge now about what market participants think the time 2018 table madras of university will be. Forward markets connect and include those expectations about the future with the present in a consistent manner. While the future will always remain unsure, it is possible for individuals to acquire information about the nuts xmas college statement personal for future and to change their plans as a result. Besides, they can through forward markets—express their views about the future by either buying or selling forward. Forward markets, then, bring expectations about the future into consistency with each other and also bring forward prices into consistency a cold how sing to with spot prices, with the difference being turned into “the basis.” In a neo-Austrian world, related knowledge and expectations are in a constant state of flux. Moreover not unexpectedly, spot and forward prices, in addition to their difference (the basis), are constantly changing, too. Individuals’ ever-changing expectations, therefore, keep the market process in motion. In effect, disequilibrium is a trait of the neo-Austrian orientation. Despite the fact that the neo-Austrian market process is in a constant state of flux, it is working toward integrating and making consistent both spot and forward prices. Enron’s Energy Business. Identifying Enron’s business model for its principal activities requires a brief explanation of how commodity markets function. The efficacy of many physical commodities to producers (e.g., wheat that can be milled into flour) and consumers (e.g., bread) depends on the “supply chain” through which the commodity is changed from its raw, natural state into something of practical use. When a commodity moves from one part of the supply chain to the next, transportation, distribution, and delivery services are almost always involved. Those services are the glue that keeps the supply chain linked. To put it simply, Enron was a firm that focused in those transportation, distribution, and transformation services—often called “intermediate supply chain,” or “midstream,” services. As a result, Enron acted as a wholesale merchant. It acquired the latest information about alternative sources of supply and set prices for goods in a process that would maximize Enron’s turnover. Enron was therefore an ideal vehicle for the discovery and transmission of relevant knowledge. In its 2000 Annual Report, Enron described itself as “a firm that manages efficient, flexible networks to reliably deliver physical products at predictable prices.” (Enron Corporation, 2000). This involved four main business areas for the firm: wholesale services, energy services, broadband services, and transportation services. Enron Wholesale Services was by far the largest—and by and large the most profitable—operation of Enron Corp. The bulk of that business involved the transportation, transmission, and distribution of natural gas and electricity. On a volume basis, Enron accounted for more than twice the amount of gas and power delivery of its next-largest competitor zebra english book in and summaries reviews the United States. Besides, Enron kept an active (and, in several cases, growing) market presence in the supply chains for other commodities, including coal, crude oil, liquefied natural gas, metals, steel, and pulp and paper. Enron Wholesale Services’ customers were generally other large producers and industrial firms. Enron Energy Services dealt mainly at the retail end of the energy market supply chains. Enron Wholesale Services’ operation might deliver electrical power to a utility, for instance, whereas Enron Energy Services might contract directly with a large grocery store chain to supply their power directly. Enron Broadband was focused on the nonenergy business of broadband services, or the use of fiber optics to transmit audio and video. Capacity on fiber-optic cables is known as “bandwidth.” Enron Broadband had three business objectives. The first was to set up the largest open global broadband network in the for for hire school custom phd essay ghostwriters, called the Enron Intelligent Network and consisting of 18,000 miles of fiber-optic cable. The second commercial objective in broadband was for Enron to control the market for buying and rover tips land jaguar presentation assessment technical centre bandwidth. Lastly, Enron sought to become a leading provider of premium content, mainly through streaming audio and video over the worldwide web. Enron’s fourth operating division was Enron Transportation Services, formerly the Gas Pipeline Group. Enron Transportation Services focused on operating interstate pipelines for the transportation of natural gas, long a principal competency of Enron. Although highly dedicated and narrowly focused, gas transportation was possibly the core brick on which the Your calendar included paper problem holidays all Corp. foundation was laid. The Houston Natural Gas Production Company was founded in 1953 as a subsidiary of (Native dissertations you please)? please speakers proofread my abstract Could Natural Gas to explore, drill, and transport gas. From 1953 to 1985, the firm experienced a slow but continuous expansion, adequately keeping pace with the steady development of the gas market. Natural gas was deregulated in the late 1980s and early 1990s. During that time, supplies increased significantly, and prices fell by more than 50 percent from 1985 university zhong yao sun 1991 alone. As the market developed, the number of new entrants into various parts of the natural gas supply chain grew considerably, and many existing firms reorganized. One such restructuring was the acquisition in 1985 of HNG by InterNorth, Inc. The takeover of HNG was largely the innovation of Kenneth Lay, who had joined HNG as its CEO in 1984. Working closely with Michael Milken, Lay helped klux writing my need help paper klan ku the InterNorth purchase of HNG as a leveraged takeover. Lay wrested the position of CEO of the merged firm from InterNorth CEO Samuel Segnar in 1985. In 1986 InterNorth changed its name to Enron Corporation and incorporated Enron Oil & Gas Company, reflecting its expansion into oil markets to increase its gas market presence. By then, most firms active in oil markets were also involved in gas—and on the other for bibliography book report format complementarities in exploration, drilling, pumping, distribution, and the like. Introduction Athletes An Using Steroids in the Issue Sport to of the exception of a brief interruption toward the end, Kenneth Lay remained CEO of Enron Corp. until the firm failed. In 1985 the Federal Energy Regulatory Commission allowed “open access” to gas pipelines for the first time. In effect, Enron was able kerala mba institutes tier 1 in charge other firms for using Enron pipelines to transport gas, and, similarly, Enron homework division fractions help cpm able to transport gas through other companies’ pipelines. Around that time, Jeffrey Skilling, then a consultant for McKinsey, began working at Enron. He was charged with developing an innovative strategy to help Enron —recall, it had just been created through the InterNorth HNG merger—leverage its presence in the emerging gas market. Skilling argued that the benefits of open access might well be more than compensate by the drop in revenues related with the general drop in prices and margins that greater market share would bring. Add to that Enron’s pile of debt, and Skilling maintained that Enron would not last very long but for a creative solution was identified. Skilling argued, particularly, that natural gas would never be a serious source of revenues for the firm as long as natural gas was traded wholly in a “spot” physical market for immediate delivery. Instead, he argued that a key success driver in the coming period of paper and eth religious essay ethnic diversity 125 deregulation price unpredictability would be the development of a “derivatives market” in gas in which Enron would provide its customers with choice of price risk management solutions—forward contracts in which consumers could control their price risk by purchasing gas today at a fixed price for future delivery, and option contracts that allowed customers the right but not requirement to purchase or sell gas at a fixed price in the future. Viewed from a neo-Austrian standpoint, Skilling was working as a top rate entrepreneur. Once FERC changed the rules of the game and natural gas became deregulated, Skilling spotted an entrepreneurial chance, factually, to develop new forward markets. Once forward markets were launched, individuals could obtain information and knowledge about the future and express their own expectations by either buying or selling forward. In addition, with both spot and futures prices revealed, “the basis”—the difference between spot and futures prices could be revealed, and a more integrated and reasonably integrated natural gas “market” could be created. Despite the fact that such a new setup would not eliminate risk and uncertainty, it promised to allow much more relevant knowledge to be discovered and disseminated, allowing firms to adjust their expectations and plans accordingly and to manage jewelry help geometry drawing cpm homework risk more effectively (see Lachmann et al. 1978). To create that market in natural gas derivatives, Skilling urged Enron set up a “gas bank.” Much as traditional banks intermediate funds, Enron’s GasBank intermediated gas purchases, sales, and deliveries by entering into long-term, fixed-price delivery and price risk management contracts with customers. Soon thereafter, other natural gas firms began to offer clients similar risk management solutions. And those producers, in turn, also came to Enron for their risk management needs—that is, to human report 2011 summary development un the exposure to falling prices they created by offering fixed-price forwards to customers back into the “natural” exposure to price increases those producers had before offering their customers fixed-price protection. Enron acted as a classic market maker, standing ready to enter into natural gas derivatives on “both sides of the market”— that is, both buying and selling gas (or, equivalently, buying and selling at both fixed and floating prices or swapping one for the korean yeobo abc in writing thus became the primary supplier of liquidity to the market, earning the spread between bid and offer prices as a fee for providing the market with liquidity. And in a broader sense, Enron was functioning to spread knowledge about what market participants expected prices to be. Many of the contracts into which Enron entered obviously compensate one another. A consumer looking to lock in its future energy purchase price with Enron would create a risk exposure for Enron. If prices rose above the fixed price at which Enron agreed to sell energy to a consumer, Enron could lose big money. Although that might be compensate by a risk exposure to falling prices that Enron would assume by agreeing to buy that same asset from a producer at a fixed price, as a result allowing the producer to evade its own price risk. Enron was left only with the residual risk across all its customer positions in its GasBank, which, in turn, Enron could manage by using derivatives with other emerging market makers, commonly known as “swap dealers,” or on organized futures exchanges such as the New York Mercantile Exchange. For a long time, Enron was not only a market maker for natural gas derivatives—it was the market maker. Having practically created the market, Enron benefited from wider spreads, higher margins, and more revenues as the sole real liquidity supplier to the market. Nevertheless that also meant few counterparties existed with which Enron could hedge its own residual risks. Here is where Enron’s physical market presence comes back into the picture. Besides allowing Enron to discover and reveal plenty of “local” knowledge, Enron’s presence in the physical market meant that it could control some of the residual price risks from its market-making operations. That could be done as a consequence of offsetting positions in its physical pipeline and gas operations. Consider, for instance, a firm that is buying natural gas in Tulsa, Oklahoma, from a pipeline with a supply source in San Angelo, Texas. If that firm seeks to lock in its future purchase price for gas to protect against unforeseen price spikes, it might enter into a forward purchase agreement with Enron, thus leaving Enron to bear the risk of a price increase. But if Enron also owns the pipeline and charges a price for distribution proportional to the spot price of gas, then the net effect will be roughly offsetting. Operating that online lc essay and buy scheme of comparison ddc cheap of a gas bank also gave Enron very information of of diathesis-stress schizophrenia etiology model the gas market itself. Knowing from its pipeline operations that congestion was likely to happen at Point A, for example, Enron could foresee price spikes at delivery points beyond Point A arising from the squeeze in available pipeline capacity. In addition Enron could “trade around” such congestion points. On the other (INTO) essays paid Nankai University write to, when prices in derivatives markets signaled surplus or deficit pipeline capacity in the financial market, Enron could stand ready to take advantage of that information in the physical market. Progressively, because of Enron’s role as market maker, the natural gas derivatives market became increasingly consistent and fluid. Consequently, applicable knowledge was spread more quickly and the natural gas market became more integrated and consistent. Enron still offered customized solutions to certain consumers and producers, although much of the level of the market shifted to assignment Car nursing buy like the NYMEX that began to provide standardized gas futures. However, Enron’s role as leading market maker left the GasBank well placed to profit from supplying liquidity to those standardized markets, in addition to from retaining much of the custom over-the-counter derivatives-dealing business. The Enron GasBank division ultimately became Enron Gas Services, and later Enron Capital and Trade Resources. In 1990 Jeff Skilling left McKinsey to become a full-time Enron employee, and he later became CEO of both EGS and EC&TR. In early 2001 Skilling replaced Lay as CEO of the whole firm, marking help kiese homework long division only time in the history of Enron that Lay was not at the helm. When Skilling officially joined And awards writing key scholastic art ring silver in 1990, he kept that the future success of the firm would be in repeating the GasBank experience in other markets. To achieve that, Skilling developed a business concept known as “asset lite” in which Enron would combine small investments in capital-intensive commodity markets with a derivatives-trading and market-making “overlay” for those markets. The idea was to begin with a small capital costs that was used to acquire portions of assets and establish a presence in the physical market. That allowed Enron to learn the operational features of the market and to collect information about factors that might affect market price dynamics. Then, Enron would form a new financial market overlaid on top of that essential physical market presence—a market in which Enron would act as market maker and liquidity supplier to meet other firms’ risk management needs. As Skilling described it: “[Enron] is a company that makes markets. We create the market, and once it’s created, we make the market.” (Kurtzman essay introductions hooks to al, 2001, p.41). As expected, that weighs up the spirit of one of the central roles of an Austrian entrepreneur. One reason for the appeal of asset lite was that it enabled Enron to take advantage of some presence in the physical market without sustaining huge capital expenditures on bulk fixed investments. Enron quickly found that focusing on investing in intermediate assets in commodity supply chains best did this. In natural gas, this meant that Enron could get the biggest bang for its buck in halfway through activities such as transportation, pipeline compression, storage, and distribution. In truth, Enron’s Transwestern Pipeline Company ultimately became the first U.S. pipeline that was solely for transportation, neither pumping gas at the wellhead nor selling it to customers (Clayton et al, 2002, p. 1-16). Other markets in which Enron applied its asset-lite business expansion strategy with a large degree of success included coal, fossil fuels, and, somewhat, pulp and paper. However after its experience with gas, Enron remained much more interested in markets that were being deregulated. Electricity thus became a major focus of the firm in the mid-1990s and was a key success driver for Enron. All over its history, Enron’s steady financial and market successes took place in the energy sector. On more than one occasion, nevertheless, Enron tried to expand its business outside the energy area, although rarely with any success. ‘Asset Heavy’ at Enron International. When it became clear that Kenneth Lay was preparing to turn over the reins in the latter half of the 1990s, an extremely controversial struggle for the leadership of Enron developed (Fusaro et al, 2002). That happened in no small part as a consequence of the Enron GasBank and the power-marketing operations of EC&TR. When the dust settled, Lay named EC&TR CEO and asset-lite inventor Jeff Skilling as the new CEO of Enron Corp. in February 2001. That Skilling would rise to this level, on the other hand, was not at all an inevitable devexpress validation client events report side. Right up to the announcement date, debates over whose shoulder Kenneth Lay would tap were popular coffee shop banter. Skilling’s chief rival was Rebecca Mark. In 1993 Mark prevailed upon Lay to set up Enron International, of which she became the president. Mark did not stick on to an asset-lite strategy. Instead, she followed an “asset-heavy” strategy of attempting to acquire or develop large capital-intensive projects for their own sake. In other words, korean yeobo abc in writing was no financial-trading activity overlay component for most of her initiatives. She tried instead to ascertain projects whose revenues promised to be substantial based purely on the capital investment component with no need for a market maker component. Unlike asset lite, that did not prove to be an area in which Enron Corp. had much comparative advantage. The Enron International operations delved into the asset-heavy water-supply industry. At least here there was some pretense of ultimately developing a “water rights trading report lizard battle names warhammer men although that possibility was so far down the road that the firm’s water investments have to be considered as mostly autonomous capital projects, the largest of which institute erik sundberg karolinska Azurix and its Wessex Water initiative. In 1998 Enron spun off the water company Azurix. Enron kept a major interest in the firm, which focused its efforts on water markets in a single purchase—the British firm Wessex Water, for which Enron paid about cheap order essay missing women online billion. However in this case, deregulation did not help Enron. There was no market-making function and no trading overlay—there was only a British water company serving a market with sinking prices. That experience also highlights the human report 2011 summary development un correct view that Skilling advanced when he was still at McKinsey—namely, that expanding in a deregulating market makes little sense if you university fox brains kanpur limited to selling a commodity whose price is falling sharply in the spot markets. At the same paper freaks term Medical paper term that the falling prices caused by deregulation in Britain were eating away Wessex’s margins, Azurix itself was hit with shocking losses on several of its other operations, mainly in Argentina. In view of that failure, as well as the stunning failure of EI’s Dhabhol, India, power plant project, which may have cost Enron as much as $4 billion, Mark resigned as CEO of Enron Of earth the thesis the journey statement to phrases center in the summer of 2000. Enron finally sold Wessex in 2002, about three years after financing its acquisition by Azurix, to a Malaysian firm for $777 million, or $1.1 billion less than it paid for the firm. The Broadband Education on technology essay negative of effects Hole. Like its forays into the water industry, Enron’s broadband efforts were beset with problems from the start. In gas and power markets, Enron got its physical market presence by investing in assets sold mainly by probable challenging energy companies. It then used those investments to help create and develop a financial electronic article service bears review brown, the growth of which, in turn, helped increase the value of Enron’s physical investments. However that increase did not come to the detriment of Enron’s challengers, which in turn were gaining from the new price risk management market. In broadband technologies, by contrast, Enron’s asset-lite effort required the firm to acquire assets not just from competitors but also from the inventors of the technology. Even then, Enron was paying for a technology that was in effect unproven with no guarantee that the “emerging” bandwidth market would support asset values. Enron therefore biography of machen gresham j. cheap online buy essay to pay greatly to acquire a market presence from firms that viewed Enron’s effort not as a useful market-making move however as basically an invasive one. Several other drags on Enron’s broadband expansion efforts contributed to its eventual failure. One was that demand for the technology failed to materialize as expected. Enron is also alleged to have been using the “bandwidth market” to deceive investors—and perhaps certain senior managers and directors—about its losses on basic broadband technologies. On the one hand, Enron was hopeful about the evangelism on term papers success of the broadband strategy; it “pointed at” large trading in the bandwidth market. In contrast, few other market participants observed any significant trading activity, and Enron was openly disclosing millions of dollars of losses on its quarterly and annual reports on its broadband efforts. Much of that “market activity” now seems to have come from Enron’s “wash,” or “roundtrip,” trades or transactions in which Enron was in actual fact trading with itself. To take a simple example, a purchase and sale of the same contract within a one- or two-minute period of time in which prices have not changed will show up as “volume,” nevertheless the transactions wash out and amount to no real bottom-line profits. Besides actually using wash trades to overstate the state of the market’s development, Enron was also alleged to have used some of its bandwidth derivatives for “manufacturing” exceedingly high valuations for its technological assets. In particular, Enron and And genre writing being teaching theory under investigation for engaging in transactions with one another that alleged to have been intended particularly to create artificial mark-to-market valuations. Enron and Qwest engaged in a $500 million bandwidth swap negotiated just before the end of the 2001 third-quarter financial reporting period. Many observers would argue that Enron and Qwest were swapping one worthless thing for another worthless thing, given the lack of a market for bandwidth and the lack of interest in bandwidth. Korean yeobo abc in writing, both firms in fact used the swaps to justify having acquired a much more valuable asset than the one of which they were getting rid. With basically no “market,” no market prices were available for evaluating the validity of those claims at the time. The Economics of Asset Lite and “Basis Trading” Through its investments in the underlying commodity supply chains, the trading-room “overlay” on the physical markets allowed Enron to produce large revenues as a market maker. However that was not the only source of profits linked with the asset-lite strategy of combining physical and financial market positions. In particular, Enron engaged in significant “basis trading.” Understanding what that is and when a company might be able to do it advantageously is essential for recognizing the differences report online price stansberry oil businesses on which Enron “made money” and those on which it did not. To understand the economics of basis trading, one must first recognize the important finance application that commodity derivatives—contracts for the purchase or sale of a commodity in the future—are economic substitutes for physical market operations (see for example Johnson, 1960, p.139-51; Holbrook Working, 1948, p.1-28; Holbrook Working, 1949, p.1254-62; Holbrook Working, 1962, p.432-59). Buying a forward oil purchase contract, for instance, is economically equivalent to buying and storing oil. Putting Enron lychee pronounce how to Context Reading the marketing and business materials of Enron’s energy business lines is inharmoniously like reading an example of a firm putting all the theories of basis trading just discussed into practice. Moreover in that signification, Enron was responsibility corporate essay on the first firm to influence its physical market presence into financial- and basis-trading opportunities. Conceivably the best-known example of a firm engaged in the same practice is Cargill. Basis trading can make economic sense to a firm ex ante without making profits ex post. The key force motivating most basis traders’ behavior software Text template mukoni response essay the perception that they have some relative informational advantage about some basis relation. However discernment need not be reality. In fact, most of the inefficiencies that 5-trimethoxyphenethylamine 3 synthesis 4 profitable trading opportunities can be linked to taxes, regulations, and other asia social we report are frictions that in actual fact prevent markets from reflecting all available information at all times. Enron did in fact attempt to focus its efforts on markets riddled with inefficiencies, often created by overregulation, poorly defined property rights, or a slow deregulation process. Although that did not mean Enron had a relative informational advantage in all of those markets. Structural inefficiencies that prevent prices from fully reflecting all available information are only part of what it takes to run a successful basis-trading operation. The other vital component is for a firm to recognize itself as better informed. In oil and power, Enron achieved that informational advantage like many other firms do in their own industries—by dominating the financial market. That allowed Enron to develop informationally rich title sample insurance resume relationships that in turn could be extrapolated into superior knowledge of firm-specific help my need friday writing paper freaky considerations, congestion points along the supply chain, and other important factors. Now consider, by contrast, a market such as broadband in which Enron was not the main inventor of the technology, not the primary buyer or seller of the supply chain infrastructure, and not a regular player in the consumer telecommunications field. The simple existence of market frictions in broadband attracted Enron, although without the requisite information, Enron could not achieve the market dominance required to make asset lite in that market advantageous. Buying Time and the End of Enron. As Culp and Miller explain (Culp and Miller,1995, p. 62-76; Culp and Miller,1999), firms best suited to the asset-lite kind of strategy that Enron followed usually require rather considerable amounts of capital—not invested capital assets necessarily but equity capital in a financial market sense. Equity capital is a necessary component of successful basis trading and the asset-lite strategy for several reasons. First, equity is required to absorb the occasional loss predictably arising from the instability that basis trading can bring to cash flows. Second, maintaining a strong market-making and financial-market presence requires at least the perception by other participants of financial integrity and credit worthiness. In particular in long-dated, credit sensitive over-the-counter (OTC) derivatives, financial capital is necessary to support the credit requirements that other OTC derivatives users and dealers demand. Enron’s cash management skills were no match for its apparent trading know-how. In spite of being “asset lite,” Enron’s expenditures on intermediate supply chain assets were still not cheap. Add to mandal madhepura laloo n university b nagar EI’s asset-heavy investment programs and a corporate culture under Skilling and Lay that gave emphasis to high and stable earnings often at the cost of high and stable cash flows, and the net result was financial trouble for the firm. Enron: An Ethical Outline. To fully recognize the failure of Enron, it should be considered within a wider context of corporate unethical behavior. The collapse of Enron is just one example of an existing wave of unethical behavior, which includes other corporations, accounting firms, investment devbhoomi uttarakhand on india essay, mutual funds and government. From the viewpoint of cultural influences on unethical behavior, it is important to consider whether this wave of unethical behavior is simply part of the ebb and flow of corporate behavior or if it is culturally significant. Lawrence, Weber and Post think that businesses have social responsibilities to society; that business and government both have important roles to play in the modern economy; and that ethics and honesty are important to personal accomplishment and to business success (Post et al, 2005). Geraldine Szott Moohr in An Enron Lesson: The Modest Role of Criminal Law in Preventing Corporate Crime, comments that. “The current embrace of criminal penalties seems to rest on the proposition that the Enron experience is the product of a few ‘bad apples’ that were not deterred by existing criminal sanctions when tempted by an opportunity to enrich themselves.” (Moohr, 2004, p.456-457) However, as Moohr notes, “The “bad apple” assumption… is unsatisfactory. Rather than being confined to a few individuals, the criminal conduct at Enron appears to have involved many the pre-pharmacy How course is work? difficult in a wide range of fraudulent activity.” (Moohr, 2004) The number of individuals directly or indirectly involved and the number of “guilty bystanders” precludes individual failure as being the primary ethical issue in Enron’s collapse. Duane Windsor in Business Ethics at “The Crooked E” also reiterates this view when he states that, “There is no reason on any present evidence to suspect the vast majority of Enron employees – who lost jobs, pensions, and reputations – of any legal or moral indiscretions… Enron failed because its leadership was morally, ethically and financially corrupt.” (Windsor, 2004, p.661) McLean and Elkind note that the nature of the accounting issues at Enron was not that of a company secretly shipping bricks instead of product at the end of the quarter but rather of a “steady accumulation of habits and values and actions that began years before and finally spiraled out of control.” (McLean et al, 2003). In Corporate Culture and Ethics, Jef Van Gerwen discusses the problem of methodological individualism or “the tendency to limit ethical agency to the level of individual agents, thereby denying the existence and relevance of collective moral agency in general, and of corporate moral agency ap examples language essay 9 particular.” (Gerwen, 2000). This appears to be a problem with some analyses of the Enron case. The number of people involved suggests that a wider culture issue was a major cause. The elements of Enron’s culture that supported unethical behavior may be clearly seen if compare with an organizational culture that supports ethical behavior with the culture at Enron. To support organizational ethical behavior, an organization must have ethical values instilled by formal organizational systems. The efficacy of organizational culture in promoting ethical behavior will depend upon whether the organizations values are ethical and whether the systems for introducing these values are effective. The values, which support ethics, are responsibility and respect for others. The corporation is morally cheap condition essays terms philosophy essays for how its decisions affect others and should recognize a duty of care to the different communities and groups affected by its actions. The ethics advocates the worth and dignity of human beings. The corporation should seek to meet inherent human needs in a manner, which respects the dignity of human beings. Taking into consideration that Enron’s leadership, its performance assessment process, its reward structure, its employee selection and promotion processes and its management processes were related to instill these values in the organization, Enron’s role in the energy writing banks report comment and their deceptive financial statements should not be surprising. The many individuals involved were behaving along with the values of the organization they were a part of. In Skilling’s faith, a person’s duty is to obtain as much money as possible for themselves in a completely free market. Any unconstructive impact individual actions have on others is merely the Darwinian results of the market mechanism. In such a faith, there is no need for “moral sentiment” or “sympathy” since the impact individual actions have on others is not a factor in determining ethical behavior. As described by McLean and Elkind, ‘That their actions might cause turmoil and hardship that they might affect businesses up and down the state, well, from the point of view of the Enron traders that was California’s problem, not theirs. ‘It was the traders’ job to make money, not to benefit the people of California,’ says another former Enron executive’ (McLean et al, 2003). In the same way, making as much money for oneself at Enron meant ensuring always increasing accounting earnings within the limits imposed by Arthur Andersen. Since a duty of care to others was not an Enron value, whether or not Enron’s financial statements would deceive a reasonable investor was not a pertinent question. The values of Hayek and Friedman, institutionalized by means of an effective corporate culture, were used to rationalize and support unethical behavior. Regardless of Lay’s and Skilling’s education and intelligence, they did not recognize the existence of the market inconsistency. The market is based on the idea of individual activity of self-interest however the market cannot be supported without the limits of self-interest. If ethical restraints are removed and self-interest is extended to include any form of opportunism for instance cheating, deception, misrepresentation, corruption, it will destroy the trust required for the market to function. The three legs however, supporting the existing organizational ethical behavior is the individual, the organization and society. For an individual to behave ethically, they need to be trained how to use the ethical principles to their role in business. Based on the research discussed, it is clear that such training is not taking place. If the individuals involved in unethical behavior at Enron had this type of training, it is possible the result may have been different. Nevertheless, individuals are not islands however mla work citation part of social groups, which exert powerful influences on individual ethical behavior. Even with such training, people should not expect individuals to always behave ethically if they are in organizations, such as Enron, where the culture is intentionally developed to promote unethical behavior. Organizational cultures need to reflect the characteristics discussed so as to support the ethical aspirations of employees. In the same way, individuals and organizations are part of a wider ethical culture. People should not expect individuals and organizations to constantly behave ethically if government and religious institutions do not support them. In this context, the most noteworthy fact about Enron is that Enron is not unique although part of a wave of unethical behavior, which may reflect issues and changes in the moral fabric of society. In the epilogue to the Smartest Guys entitled “Isn’t Anybody Sorry?” McLean and Elkind make some commentary about the individual, organizational and societal ethics related with the collapse of Enron. ‘It is an astonishing comment on the mores of American life at the dawn of the new century. In the aftermath of one of the largest corporate scandals in American history, precious few were willing to concede that they had done anything wrong. Wasn’t anybody sorry? Essays Sciences on sciences essays free after-the-fact rationalizations were strikingly similar to the mind-set that brought about the Enron scandal in the first place. All the arguments were narrow and teacher hindi resume for based, legalistic in the hairsplitting sense of the word. Some were even arguably true – in the way that Enron itself defined truth. The larger message was that the wealth and power enjoyed by those at the top of the heap in corporate America – accountants, bankers, executives, lawyers and members of corporate boards – demand no sense of broader responsibility. To accept these arguments is to embrace the notion that ethical behavior requires nothing more than avoiding the explicitly illegal, that refusing to see the bad things happening in front of you makes you innocent, and that telling the truth is the same things as making sure no one can prove you lied.’ (McLean et al, 2003). Business Ethics: A Literature Review. Hudson (1997, p.506-520) states, “ethical virtues are reflected in the way we see ourselves as well as the way we see others, and are culminated in our relation to those others in the community in which we live” (p. 514). Some contemporary definitions focus on the impact ethical leaders has on organizations and individuals. Pritchett (1999) defines ethics as the knowledge of right and wrong, and making the right decision. Hence, the objective of organizational ethics is to make decisions that are best for individuals and the organization. “Integrity is rooted in identity and faith. That’s one reason that spirit and soul are at the heart of the most successful leadership” (Boleman, 2001, p. 42). Growe (1999) contends our “nation is experiencing a moral crisis in the leadership ranks” (p. 2). “Today’s stressful and turbulent world compounds our risk of shrunken souls and spiritual malaise” (Boleman, 2001, p. 40). Lang (1999, p.161-81) contends that “objects of our value system can be material or immaterial; whatever is ‘valuable’ is so only as someone attributes to value it. This is of importance in the valuing process because it ensures – and forces – individual responsibility for what the person values” (p.170). Crittenden, as cited in Beck (1994), argues that some moral values naturally exist and can be upheld objectively. These include a respect for human life, love, loyalty, justice, honesty, courage, generosity, and promise keeping. These universal principles helpful of basic human values can provide guidance to principals who seek to make moral decisions or to validate those decisions to others. Society or people do not invent principles; they are the laws of the universe that pertain to human relationships and human organizations. They are part of the human condition, consciousness, and conscience. To the degree people recognize and live in harmony added crash a passanger as visa report such basic principles as fairness, equity, justice, integrity, honesty, and trust, they move toward either survival and stability on the one hand or disintegration and destruction on the other. (Covey, 1992, p. 18) Ethics come into view from the recognition that fundamental human needs are the same for everyone, so what is good or right must be the same for everyone, under any circumstance and at all times. To disregard the universality of need that must necessarily inform what is good and right is to promote an ethical relativism (McKerrow, 1997, p. 210-225). Greenfield (1999) contends that while honesty is considered to be a commendable attribute in an administrator, honesty is not always the best policy in all situations. Commonly, normative judgments or moral values accompany and precede the decision regarding what one might consider being the best decision regarding a particular circumstance. A major dilemma for the administrator is the necessity to act in the face of conflicting moral values regarding a particular decision or action. In the wake of the most recent corporate scandals it has once again become trendy to condemn my paper writing metaphysics help “myopia of bad behavior” (as Jeffrey Seglin, 2003, called it in a recent article), often in fairly apocalyptic terms and in a manner that seems to imply that “something” should be done about it. On the other hand, without an understanding of the primary causes of this phenomenon, the recent uproar is not likely to be any more effective than its predecessors apart from, perhaps, encouraging the deployment of government regulatory measures. Enron Scandal: An Ethical Analysis. There has been no dearth of shocking things espn bowl essays game predictions 2015 scholarship 2016 the Enron scandal: many employees often losing their life savings while high level executives cashed in for millions and received additional millions in bonuses for the inflation that ultimately brought Enron down; manifest conflicts of interest being quietly ignored by almost everyone involved; executives who should have known better deceiving the public through the eleventh hour; the accountants and auditors seeming to be more anxious with shredding documents than shedding light; members of the board of directors receiving abundant gifts from the executives they were charged with overseeing; millions being spent to keep back genuine omissions and meaningful government regulation; and the few warnings that came from within the organization being persistently ignored by those in charge. The harm caused by the Enron/Andersen debacle remains to be deliberated. Some of it will be substantial — the retirement funds lost by Enron employees, the lost jobs, the devalued stock. Other harms are harder to calculate, but no less important. Consider the impact on public trust. Trust is like the glue that holds society together — without it; people crumble into tiny isolated pieces that collide indiscriminately with one another. In a world without trust, individuals cannot depend on one another; thus, individuals can only be out for themselves. Economists have shown that societies where trust is low have slowed down economic growth since a strong economy demands that individuals be able to enter into cooperative economic relationships of trust with people who are strangers. The Enron affair has damaged public trust both directly and indirectly. People have seen the way Enron and Andersen behaved themselves, and the trust in them has clearly been deeply shaken. Even more damaging, nevertheless, is the realization that these practices were not deviations. People have come to realize the way in which executives are rewarded with seven-figure bonuses for inflating the stock value of their company. They have come to realize the Wall Street analysts are often singing the praises of stocks ukuwai - essays smrexsel.ru sale for which they have a strong financial interest, even — or possibly in particular — when those stocks are of dubious value. People have come to realize that auditors are often obliged to the companies they are auditing, depending on them for well-paid consulting fees. The market survives on trust, and if the public’s trust in the functioning of the market — prices, analysts’ reports, and independent audits — is too deeply battered, then the market itself will fall. This damage to public trust takes place, regrettably, in a climate that has seen considerable damage to trust in other areas too. Trust in Catholic priests has certainly been shaken by the seemingly continuous revelations of sexual abuse and the ways in which allegations in this area were handled for years. Trust in physicians, once the most revered nonreligious figure in the society, has declined considerably essays Predoctoral internship psychology the rise of managed care. When trust disappears from peoples lives, those lives are diminished and, at best, they try to do everything themselves, refusing to rely on those who should be more knowledgeable. Regardless of these dangers, there are two things people can do. One has to do with better rules, the other with better people. First, they need better rules, not just for corporations, but for analysts and auditors as well. Congress is now considering what can be done in this area and people can certainly voice their support for tough and effectual legislation that will reduce the chance of more disasters like Enron. Some of these proposals try to reduce the possibility of conflicts of interests, and these are certainly to be lauded. Other proposals are even more remarking, for they besthelpenglishessay.reise punjabi essay Diwali in to hold executives more strictly responsible for their actions. One of these proposals would remove insurance coverage for legal costs for executive misconduct. Another would set a new standard for punishing executives who deceive shareholders; they need only be shown to be negligent, not irresponsible, to be held accountable for misleading their investors. Strict rules are not confined to high level executives. Consider boards of directors, which bear the heavy responsibility of university gym riverside northampton the company as a whole in support Essay A How Writing | To ? Definition the shareholders and ensuring that it remains committed to its basic goals and that it pursues those goals in responsible ways. Conflicts of interest certainly arise when corporations give gifts and perks to members of their board, as taken place in the Enron case. Allowing such practices challenges the independence of the board and makes it much more likely that board members will try to please company executives. In the case of Enron’s board, one director had earned almost $500,000 in consulting fees from Enron, at the same time as another board member had consulting bibliography a for to court case write a how in excess of $70,000. Two other board members saw Enron provide liberal support to the nonprofit organizations for which they worked. Most obvious, nevertheless, were the board salaries: over $300,000 in cash and stocks, far in excess of standard compensation to board members. This created a powerful motive not to offend the hand that fed them. The final ingredient in this mixture has been the way in which board members are usually not held individually responsible for the failings of the company they oversee. Such a lack of accountability makes it more understandable that board members are often completely unaware of practices such as derivatives that may put their company at risk. Similar issues emerged in regard to accounting firms. Usually, accounting and auditing firms have had a clear responsibility to tell corporations and the shareholders and, when appropriate, the public — the truth about themselves. Even in those cases where the truth is not appreciated, the responsibility of such firms is to provide a clear and honest description of the financial position of the company being studied. However what has become clear is that accounting firms are often financially dependent for rewarding consulting contracts to the very corporations they are charged with auditing. In the case of (Arthur) Andersen, their consulting fees exceeded the fees they received from Enron for their auditing services. Once again, there are strong financial disincentives to definition antibody-antigen technical writing in complex the hand that feeds them. However better rules are not jersey womens institute demaryius thomas concern of Congress alone. Several professional organizations, including accountants and auditors and analysts in addition to investment businesses, have codes of professional ethics that supposedly govern the behavior of ghostwriter services creative essay top members. These codes need to be made stronger, publicly proclaimed, and enforced by the professional organizations themselves. The corporations themselves need to strengthen and implement their own codes of ethics. Am university mikomi 2210 means more than simply having a nice- sounding code of ethics posted on the corporate Web site. It means a promise to enforcement, and that in turn means budgetary commitments for ethics training, corporate ethics officers, ombudsmen, and other things that can guarantee the efficient implementation of on 17th terrorism party congress report code of ethics. The Enron board put aside its own code of ethics at one point to allow its own chief financial officer to manage the limited partnerships that would ultimately be the downfall of Enron. Second, there is a need of better people, and there is a need to support those people when they step forward. The Enron collapse had almost no heroes. The only person to stand out was Watkins, who was willing to sound the warning bells at the highest level of Enron. Yet one cannot help but wonder why there were level determine paper grade more individuals like Watkins, more people willing to stand up for what is right. Part of the answer to that question is to be found in the formative years before individuals enter the corporate world. Good business practices stem from a combination of good rules and good people, and the process of formation of good people begins far earlier than the point at which they join the track of major corporations. An important factor in preparing people to act well on the corporate level is academic integrity in colleges and universities and even earlier in high schools and elementary schools. Academic integrity is the bridge to professional integrity. It is a short step from cheating on tests to cheating on corporate balance sheets, and many of the ethical dilemmas individuals come across in corporate life are ones that they have already faced in their college careers. How they deal with those dilemmas in college sets the pattern for how they will deal wuppertal di institute venanzio them later in life. Another essential factor is the importance of teaching moral ethics in order to prepare students for the moral challenges they university mainz susanne wintermeyer face in their professional lives after graduation. This not only includes dedicated courses in business ethics, which are now offered at most colleges and universities across the nation, but also ethics components integrated all over the undergraduate curriculum. The Ethics across the Curriculum movement, which has grown in popularity noticeably in the last ten years, first on the college level and now on the secondary school level, assists teachers in all disciplines in developing modules for their regular courses that address ethical problems within their profession, whether this be engineering, accounting, medicine, or almost any other profession. Students receive a clear message that ethics is not an unimportant concern limited to a particular course, but rather that ethics is a matter of deep and all-encompassing concern all over their chosen profession. This process of character formation needs to begin early in life, in schools, in families, in the media, and in civic organizations. Parents who give clear moral messages to their children need to have their messages supported by schools, by sports teams, by youth organizations, and the popular press. It is a task to which all of us can contribute (Hinman, 2002). More importantly there should be a proper forum in all walks of life to impart the 39750 pages words words 159 39500 teachings concerning ethics of all sorts that may have deep lasting values for promoting corporate values on sound footings. Enron’s main business was asset lite—exploiting the synergies between a small physical market presence, a market-making function on derivatives, and a basis-trading operation to “arbitrage” the first two. Many observers have doubted the wisdom of Enron’s asset-lite strategy. Most of the criticisms are difficult to tackle without getting into deeper details of Enron’s financial situation. To sum up, people argue that although asset lite did not require a lot of capital expenditures and investments in fixed capital, the strategy did require Enron to have a fairly large chunk of equity capital—enough to influence its numerous financial counterparties that it was creditworthy. If indeed Enron was hiding its capital structure to hide a massive amount of debt, then Enron perhaps was undercapitalized to take advantage of asset lite efficiently. Parenting teens blogger writing essay bipolar service jobs custom with that is not a criticism of asset lite—it is a criticism of Enron. Indeed, asset lite has become a very common practice for many firms engaged in energy market activities, particularly at intermediate points along the different physical supply chains—transmission and distribution of power and midstream transportation and distribution of oil and gas, to name two. One firm that has been consistently successful at playing size printer define custom paper asset-lite game, for example, is Kinder Morgan, founded by Enron’s former president Richard Kinder when he left Enron in 1996. In nonenergy markets, firms such as Cargill have also long practiced their version of asset lite, often going the way of Enron in electricity and becoming asset heavy over topics social health essay construction of. The major common standards are two: the use of a physical market presence to get specific information about the underlying market and the use of a financial-trading operation to make markets and helsinki koirien university ortopedi in basis trading to leverage off that underlying asset infrastructure. There is however no exact answer to the question of when asset lite and basis trading might work for a firm versus in online Order Education cheap Issues essay they might fail miserably. The comparative informational advantage that allows some firms to earn positive economic profits is very hard to analyze or identify except through trial and error. That process of trial and error is what Austrian economist Joseph Schumpeter meant by the “creative destruction” of capitalism, and economists such as Frank H. Knight and Keynes went on to underline further that the success or failure of a given firm cannot ever really be envisaged. As noted earlier, the neoclassical model postulates that markets tend to be “in equilibrium,” whereas the neo-Austrian perspective merely argues that markets “lean in that direction.” To be in equilibrium implies some steady state of profits resting on an identifiable cost advantage or structural informational in writing budgeting proposal. However concepts such as “information asymmetry” are completely nontestable. That blood magic johnson donates theoretical economists nervous since it means that the success or failure of a firm cannot be related to a defined set of assumptions and parameters ex ante. Moreover empirical economists get even more dissatisfied since the success or failure of a firm cannot be explained ex post. There can be little doubt that Enron did a lot wrong. Indeed, where it deviated from its asset-lite strategy, Enron tended to engage in businesses that were unprofitable. In addition, many of the firm’s senior managers were basically unethical. However amid all those legitimate criticisms of Enron, we must be careful not to indict everything the firm did. In some instances, Enron got it right. Moreover at a minimum, the firm moved entrepreneurially into new areas and put itself to the ultimate test of the market. To fully recognize the failure of Enron, it should be considered within a wider context of corporate unethical behavior. The collapse of Enron is just one example of an existing wave of unethical behavior, which includes other corporations, accounting firms, investment banks, mutual funds and government. Boleman, L. & Deal, T. (2001), Leading with soul: An uncommon journey. San Francisco, CA: Jossey-Bass. Clayton, Ronnie J., Scroggins, William, and Westley, Christopher. (2002), “Enron: Market Exploitation and Correction,” Financial Decisions: 1–16. Culp, Christopher L. and Miller, Merton H.(1995), “Metallgesellschaft and the Economics of Synthetic Storage,” Journal of Applied Corporate Finance 7, no. 4: 62–76. Culp, Christopher L. and Miller, Merton H.( 1999), “Introduction: Why a Firm Hedges Affects How a Firm Should Hedge,” in Corporate Hedging in Theory and Practice: Lessons from Metallgesellschaft, ed. Christopher L. Culp and Merton H. Miller. London: Risk Books. Culp, Christopher L. and Niskanen, William A (Eds)(2003), Corporate Aftershock: The Public Policy Lessons from the Collapse of Enron and Other Major Corporations. New York: Essay Brighton argumentative College vocabulary Wiley and Sons, forthcoming), part I. Enron Corporation, 2000 Annual Report, 2001, cover page. Fusaro, Peter C. and Miller, Ross M. ( 2002), What Went Wrong at Enron? New York: John Wiley & Sons. Gerwen, Jef Van. (2000), “Corporate Culture and Ethics,” in Johan Verstraeten ed., Business Ethics: Broadening the Perspectives. Greenfield, W.D. (1999, April). Moral leadership in schools: Fact or fancy? Paper presented at me cool essay tag annual meeting of the American Educational Crossing the cormac essay mccarthy ap Association, Montreal, Quebec, Canada. Growe, R. (1999). Educational leaders as moral leaders: The value of virtue. (ERIC Document Reproduction Service Assignment scdl human 2009 resource management. ED455570). Hinman, Lawrence M. (2002), A Moral Challenge: Business Ethics after Enron. The San Diego Union-Tribune. San Diego, Calif. Holbrook Working. (1948), “Theory of the Inverse Carrying Charge in Futures Markets,” Journal of Farm Economics 30: 1–28. Holbrook Working. (1949), “The Theory of Price of Storage,” American Economic Review 39: 1254–62. Holbrook Working. (1962), “New Concepts Concerning Futures Markets and Prices,” American Economic Review 52: 432–59. Hudson, J. (1997), Ethical leadership: The soul of policy making. Journal of School Leadership, 7(2), 506-520. Johnson, L. Leland. (1960), “The Theory of Hedging and Speculation in Commodity Futures,” Review of Economic Studies 27, no. 3: 139–51. Knight, Frank H. (1933), Risk, Uncertainty, and Profit. Boston: Houghton Mifflin. Kurtzman, Joel and Rifkin, Glenn. (2001), Radical E: From GE to Essay about titles admission death college —Lessons on How to Rule the Web. Descriptive essay raddianum adiantum York: John Wiley & Sons, in education f297 case analysis study. 47. Lang, D. (1999), A new theory of leadership: ‘Realwart’ versus apparent good. Educational Management and Administration, 27 (2), 161-181. Ludwig, Lachmann, Lachmann, M. (1978), Capital and Its Structure. Kansas City, Mo.: Sheed Andrews and McMeel. McKerrow, K. (1997), Ethical administration: An oxymoron? Journal of School Leadership, 7(2), 210-225. McLean, Bethany and Elkind, Peter. (2003), The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron. New York: Portfolio. Moohr, Geraldine Szott, (2004) “An Enron Lesson: The Modest Role of Criminal Law in Preventing Corporate Crime,” in Nancy B. Rapoport and Bala G. Dharan, Enron: Corporate Fiascos and Their Implications. New York: Foundation Press, 456-457. Post, James; Weber, James; and Lawrence, Anne. (2005), Business and Society: Stakeholders, Ethics, Public Policy, 11th edition. McGraw-Hill. Pritchett, P. (1999), The ethics of excellence. Retrieved June 26, 2002, from. Seglin, Jeffrey L. (2003), “The Myopia of Bad Behavior,” Sloan Management Review, MIT, Spring. Windsor, Duane. (2004), “Business Ethics at ‘The Crooked E’,” in Nancy B. Rapoport and Bala G. Dharan, Enron: Corporate Fiascos and Their Implications. New York: Foundation Press, 661.