Good Example Of Critical Thinking On Enron: The Smartest Guy In The Room
“Enron: The smartest guy in the room” is a documentary movie directed by Alex Gibney. The movie discusses complete story of Enron, starting from formation of the company by Kenneth Lay in year 1985 till its debacle in year 2001. Enron just two years after its formation started involving into scandals. Lay removed CEO Louis Borget after realizing the fact that Borget is diverting Enron’s money to different offshore accounts. Jeffrey Skilling joined Enron as new CEO of the company. Skilling promoted mark-to-market accounting practice under which company can record profit that will be generated from the project right after execution of contract. Mark-to-market accounting allowed Enron to look profitable even in the time when company was making losses (Gibney).
Enron under the guidance of Lay, Skilling and Author Anderson (accounting firm) committed various crimes such as manipulation of financial facts and documents, hiding actual profit and revenue of the company from stakeholders, manipulation in stock trading, and creation of limited partnership or special purpose companies just to manage fund & risk. Enron created brutal workplace environment and forced all executives and other staff to adopt unethical practices in order to make profit. Enron created California power crisis by shutting down the power plant for maintenance; whereas, in reality there was no shortage of power supply in California. Enron looted retirement fund of its employees. The company was in all manners hiding their losses and transferring it to other subsidiary companies created by the Enron. Corrupt accounting practices, misleading investors and other practices performed by Lay and Skilling resulted in debacle of the company.
Enron scandal resulted in modification in mark-to-market accounting method and creation of Sarbanes-Oxley Act. The Sarbanes-Oxley Act makes provisions for companies to adopt strict accounting practices such as indent audit, strong internal financial controls, and open financial reporting. After debacle of Enron and long years of court proceedings, Enron’s shareholders received $7.2 billion. Enron succeeded in fooling so many people for such a long time because company was involved in creative trading. Enron manipulated documents and gave an impression that the company is huge making profits. Such practices still exist in the Wall Street (Gibney).
A whistleblower is someone who tries to bring forward any irregularity in any organization that should not happen. Sherron Watkins is known as the whistleblower of Enron. She raised her voice against manipulations in accounting of the company. She conveyed her concern to company’ CEO and confessed about her role also before US senate committee. Watkins was acclaimed for disclosing about the fraud but at the same time she was criticised for disclosing everything when it was too late. Watkins gives speeches in management institutions. She wrote one book about her experience in Enron.
My perception about big corporations is certainly changed after watching this movie. I think all big companies do some manipulations in order to fool people, authorities and investors. These companies have nothing to do with welfare of the people or the society but they only care about their benefits without going into ethical or unethical aspect of the same. This movie is an eye opener and suggests that nobody should believe in any company without going into each and every detail.
Gibney, Alex. "Enron - The Smartest Guys in the Room." 24 April 2007. documentaryaddict. 21 April 2015 <http://documentaryaddict.com/enron+the+smartest+guys+in+the+room-766-doc.html>.