Question # 1:
The culture within Enron was that of corruption greed and deception. The top executives did not sustain an open relationship with the employees and other stakeholders of the firm. The culture was therefore the driving force that led them to hide the company losses and paint the wrong profitability picture to the other people. The leadership under Jeff Skilling and Kenneth Lay were more about enriching themselves than listening to the demands of their juniors. However, they were not the only people who contributed to this culture. The supply chain members were also players in the same game. In any firm that thrives on a proper supply chain, any problem affecting the firms displays itself in this supply chain as a reflex (Fontana). The areas that feel the impact of any survival squeeze are the logistics, quality control, overtime labor, safety stocks, suppliers’ quality, and external spending. Therefore the supply chain partners will notice the changes in stock, lagging in response times, late deliveries, partial order fills, and general improper communication.
The culture of greed engulfed even the members of the supply chain when the top management would fire or dismiss any employee or supply chain member if they raised any questions. Eventually, they eliminated all those who were not on their side and thus maintained the greed culture. Many of the supply chain partners were well to do people and did not want to lose their contracts with the company. The lying and deception continued up to these levels and they did not report any form of malpractice. Therefore they kept lying to the outsiders to keep their sticks while they sold their own.
If the supply chain partners were vigilant and report the case early, then the system would have survived. The regulators or supply chain partners could have reported the performance changes, suspend any collaborator status, and take corrective actions (Fontana). The partners would have taken a site visit on the company and be on the lookout for a change in personnel, performance metrics, empty workstations, and crew strength. This way they could find a proper corrective action after analyzing the problem.
President Bush and his family had a long-standing relationship with Kenneth Lay who was a top executive at Enron. Ken Lay was a supporter of Bush in his 1994 run for Texas Governor where he continued $37,500 to the campaign ( Richard, and Don). The company went on to be a generous donor to the Bush campaign and in turn, Bush advocated for the issues dear to Enron such as deregulating electricity markets and restricting large civil jury awards. Mr. Lay also was close with Bush’s vice President, Cheney who also directed important energy policies (Jr, Richard, and Don). The long-standing and public relationship between the two thus created a positive impression for Mr. Lay within the company. The employees and the general public thus saw him in a positive light and were not aware of the existence of greed and deception in his workings. This is one of the many ways that he created a positive image within the public that created reassurances without proving the profitability of Enron’s endeavors.
The most prominent tactic used by Enron management to hide their tendencies appeared in their accounting platforms. Skilling introduced the Market-to-Market accounting method which measures the fair value of accounts that can change over time. The method however can be manipulated, since it is not based on the actual cost but fair cost. The company thus logged in the estimated profits instead of the real profits. The company also used the tactic of trading everything. Their success in the energy trade gave them the hubris to invest in many more subsidiaries such as blockbuster, Enron Online, and SPVs (Li 37). The failures started mounting from the subsidiaries and they used the accounting tactics to cover it up. Enron invented the partner companies to hide the n losses leaving the stock markets looking good. Scrutiny into these tactics brought them down.
Fontana, John. “The Supply Chain: A Canary in the Corporate Coal Mine – Inbound Logistics.” Www.Inboundlogistics.Com, 1 Oct. 2002, www.inboundlogistics.com/cms/article/the-supply-chain-a-canary-in-the-corporate-coal-mine/. Accessed 17 June 2020.
Jr, Richard A. Oppel, and Don van Natta Jr. “ENRON’S COLLAPSE: THE RELATIONSHIPS; Bush and Democrats Disputing Ties to Enron.” The New York Times, 12 Jan. 2002, www.nytimes.com/2002/01/12/business/enron-s-collapse-the-relationships-bush-and-democrats-disputing-ties-to-enron.html. Accessed 17 June 2020.
Li, Yuhao. “The case analysis of the scandal of Enron.” International Journal of business and management 5.10 (2010): 37.