Enron Scndal Reaction Paper

Name: Danna Fhel P. Rellera Subject: MAS1 Room: BE306 Professor: Rebecca Maquiling

Date: February 16, 2016

ENRON SCNDAL REACTION PAPER

ENRON was once America’s most innovative company, and was famous throughout the business world from 1990’s until the fall of 2001. As future professional inline with business, I’m amazed at the same time disappointed with the management of ENRON, as well as with the higher positioned employees, because they covered its bankruptcy as a steady company with good revenue. It is quite alarming, since a lot of its employees and investors were affected. For me, the Management is not just the one to be blamed, but also the Government, since they don’t have that strict policy to protect as well as to control every entity. As I read an article about the fall of ENRON, I think one of the reasons of their fall was their strategies and their way of running the company. The giving of bonuses to those who closed deal was catching my attention, because as stated in the article “Everyone was in a hurry to close deals (good or bad) because right after a closed deal, they got their bonuses regardless of the result of the deal”, which means that everyone was just concern with the deals to closed without bothering if it could give some profit to the company or not. Another problem that catches my attention was the Mark-to-market Accounting, where the company will use estimations of future incomes when a long-term contract is signed. This simply means that this estimation of future cash flow to the company was already included in ENRON’s accounting even though this said money was not yet received. The result of this transaction has already given the investors the misleading information, which is supposedly already a violation. I was also alarmed that the employees of ENRON was competing with each other, because of the company’s policy of Performance Evaluation, where the employees are rated from 1 to 5, 1 being the highest and everytime you were marked 5, then it means you have to pack your things because you will lose your job anytime soon. As a company, employees should cooperate with each other but it turns out that they were competing. Everyone needs to cooperate to improve the company not to compete with each other just to stay in the company. There are a lot of discrepancies that ENRON has made, which could give everyone knowledge on how to handle future circumstances to be encountered. As future accountant it is really important to maintain our ethical conduct, and professionalism. It is a warning to those who are already doing it, for them to stop and do the right things instead.