Most challenging experience: personal reflection and growth

Enron Employees

Enron Corporation is an American energy company formed with the merger between Houston Natural Gas and InterNorth with Kenneth Lay as Chief Executive Officer in 1985 in Omaha, Nebraska (Wikipedia 2006). It was immediately renamed into Enron and its headquarters established in Houston, Texas. Its original business lines were the transmission and distribution of electricity and gas in the United States and the development, construction and operation of power plants, pipelines and other infrastructure worldwide. But right in its first year of operation as a merger, it went into a partnership with Spectrum 7, an oil well venture, whose chairman and CEO was George W. Bush, the son of the then U.S. Vice President George H.W. Bush. In 1998, the company opened a water sector, Azurix Corporation, but which failed to break into the water utility market and Enron would, in April of 2001, announce that it would dissolve Azurix and sell its assets (Wikipedia).

Enron attributes its success and wealth to its pioneering marketing and promotion of power and communications bandwidth commodities and related derivatives as tradable financial instruments, such as exotic weather derivatives (Wikipedia 2006). For this, the company received recognition as "America's Most Innovative Company" by Fortune magazine for six consecutive years from 1996 to 2001. It was included in Fortune's 100 Best Companies to Work for in America in 2000. Enron traded more than 800 products, including advertising risk management, bandwidth, broadband services, building services, credit risk management, crude oil and products, electricity and power, emission allowances, energy outsourcing, facility management, intelligent network, plastics, steel, streaming media and futures, such as sugar, coffee, grains, hog and other meat futures. It was later discovered, however, that many of its recorded assets and profits were inflated or entirely fraudulent and non-existent. It was found that debts and losses were entered as "offshore" entities and not consolidated with or included in the company's financial statements. Through some sophisticated and tricky financial transactions between the company and some shady entities, these losses and unprofitable items were taken off from the company's books. In 2000, Enron claimed to have revenues of $101 billion. But by the end of November 2001, its European operations filed for bankruptcy and invoked Chapter 11 for protection. At that time, it employed 21,000 people. It was considered the biggest bankruptcy in American history, which cost 4,000 employees their jobs and life savings. The series of scandals involved irregular accounting procedures bordering on fraud and perpetrated by Enron and its accounting firm, Arthur Andersen throughout the 1990s. A rescue attempt made by a smaller energy company, Dynergy, did not help. Enron filed for bankruptcy on December 2, 2001, bringing down its shares from more than $90 to 30 cents. It was revealed that much of Enron's profits and revenue were from deals with special purpose entities and that many of its debts and losses were not reported in its financial statements (Wikipedia).

In January, 2002, the U.S. Department of Justice announced it would pursue a criminal investigation of Enron Corporation and Congressional hearings started in the same month on the lawsuit filed by the company's shareholders against 29 of its directors and executives for inside trading and misleading the public (Wikipedia 2006). In January this year, Kenneth Lay and Jeffrey Skilling were indicated for a broad range of financial crimes, including bank fraud, false statements to banks and auditors, securities fraud, wire fraud, money laundering conspiracy and insider trading. The Pension Benefit Guaranty Corporation has been attempting to cover some of all of the promised benefits to Enron's employees. Thousands of employees and investors lost their life savings, their children's college funds, and pensions with the fall of Enron. Their 401 (k) plan was a defined contribution plan, there was no PBGC insurance and these employees lost the money they invested in Enron stock. They could only sue those considered a fiduciary for breach of the duty of care, based on ERISA Section 404 (Wikipedia).

On June 15, 2002, Arthur Andersen was convicted for obstruction of justice for shredding documents related to the audit of Enron (Wikipedia 2006). Although the Supreme Court later on overturned his conviction because of flaws in jury instructions, Andersen could not resume viable business, as nearly all its clients left it. The lawyers of Enron investors asked the court to assign a U.S. marshal of security team to the 19th and 20th floors of the Houston headquarters to make sure no more documents would be shredded (Cable News Network 2002). Former Enron employees reported that important documents continued to be shredded despite federal subpoenas and court orders, which prohibited the practice. The employees' condition was so severe that the word "enron" was coined to mean getting victimized or wronged by the company or boss. An "enronian" came to mean an employee or investor who suffers from corporate scandal or corruption through no fault of his or her own. It means going to work on a particular day and getting informed by the manager that the company was out of business and that one's service was no longer needed. It meant receiving the bad news without warning and with no severance pay (Wikipedia, Cable News Network).

Displaced Enron employees stood to learn from their experience that working for a large and seemingly stable company, which promises a lot of incentives and benefits and offers security, is not an assurance that it will deliver what it promises or offers. The larger the company, the greater the expenses it makes in order to survive or stay on top. Employees need to realize that their company has other loyalties to sustain. Enron had political ties to sustain and these ties needed large sums of money. Enron was embroiled in rumors of bribery and political pressure to secure contracts in Central America, South America, Africa and the Philippines. Special mention should be made about the controversial $3 billion contract with the Maharashtra State Electricity Board in India where Enron officials were rumored to have resorted to political connections within the Clinton and then Brush administrators to pressure the board.

These employees could have done something different if they were given the chance to, but they could not be given that chance. If they knew completely and exactly how their invested labors were going, they could have taken legal action to protect their interest. But management would not let them know. Management could only either apply optimism that it could solve its problems or simply justify what it was doing to make the organization survive, although management executives and officials would not guess what to do when they reached their limits.

But there were employees from the Enron ranks who should have known or recognized the impending collapse and taken some steps based on their knowledge to save the employees. These were those on the higher ranks and had access to confidential information or knew what the bosses were doing. But these trusted employees chose to leave the fate of lower-level employees into the hands of these executives and officials. They did not give these lesser employees the choice to do something for themselves and their interest. It was all a matter of a moral sense of responsibility on their part, which could not be entirely evaluated and tried in a court of law.