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Enron Swot Analysis

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As a result of the demise of Enron, an issue of sustainability of the shareholder model of corporate governance has come to the forefront of economic debate all over the world. The Enron failure shows a failure of corporate governance where internal control mechanisms were short- circuited by conflicts of interest that enriched some managers at the expense of the shareholders. As a result of that it led to a complete reassessment of ‘shareholder value’ system which became dominant in the United States and United Kingdom in the 1980s and 1990s (Dore, 2006). It is obvious that Enron case has raised important questions relating the shareholder model of corporate governance, showed some noticeable weaknesses, but also declared one significant …show more content…

This essay will analyse the historical background of the downfall of Enron and discuss main strengths and weaknesses of the shareholder model of corporate governance as an example of Enron …show more content…

To be specific, fraud of the company was on its accounting operations. Management of the company has been developed and put into practice an elaborate scheme to hide certain not only from the public but also from shareholders and investors. This was done in purpose to falsify the real financial position of the corporation. For that purpose company created not one, but thousands of legal persons, mostly offshore companies and partnerships. Although invented scheme seems to be extraordinary difficult to understand, in fact, it is quite simple. On the one hand, all deals with the electricity conducted through subsidiaries, allowed to ‘inflate’ costs and, accordingly, - the selling price of electricity at the end. On the other hand, offshore companies process debts of the corporation, that it does not want to publish. In offshore the company dumped not profit, but losses. This statement arises question - why? This allowed them to significantly improve the financial performance of the corporation, so - rose in price of its shares. Corporation captured an increasing share of the market. This allowed its management and employees receive multimillion-dollar bonuses. Naturally, the growing cost of their shares in the company. Thus, the CFO "Enron", Andrew Fastow, who developed this great scheme, received from one of the offshore activities of more than 30 million

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Background WorldCom, once known as one of the most powerful telecommunication organizations of the world, is now studied as a case of a fraudulent company that carried out unethical financial activities to cover its weakening position in the market. After some aggressive investment decisions, the company started to witness huge financial pressure. The management used various forged accounting entries to conceal its weakening position. Cynthia Cooper, Vice President Internal Audit, discovered the unethical activities and raised the issue with the management and relevant departments and received bitter responses. She carried out internal audits in her own capacity with her colleagues and compiled evidence against fraudulent activities.

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