Enron's top executives, Jeffery Skilling and Ken Lay were ruthless and corrupt. Enron's top executives began undertaking what can be referred to as "creative accounting". This involved pricing some operations higher than the accurate amount, claiming that contracts due in the future were worth more than they were, and hiding losses by selling assets that were losing money to partnerships called "special purpose entities(SPE)" Enron reported false profits by using accounting methods that failed to follow generally accepted procedures.
When Enron collapsed in December, thousands of employees lost their jobs and life savings. Although Enron had cost these people their jobs, former employees and people who knew the company all had one thing in common. They all said that Enron was an amazing company to work for. Employees were provided with a state-of-the-art gym, fridges filled with drinks, 35 aerobic classes a week. They were treated well, and the company matched employee pension contribution with Enron Stock. This method was known as the 401 k retirement plan that Enron used to con their employees with. Thousands of Enron employees had their lives shattered by the lies and fraud committed by the companies" leaders.
Recommendations/Analysis.
It is stunning how ruthless top executives such as Skilling and Lay appeared to be as the list of improprieties piled up to the detriment of both investors and Enron employees. To give both the appearance of rapid earnings growth and to avoid reporting its increasing losses, Enron's executives were part taking in a process that can be called "creative accounting." The top executives were making unethical decisions that were ultimately creating value for their own personal income. This can be seen in the example of opportunity cost. Opportunity cost can be defined as the cost of passing up or forgoing other choices by making a particular decision. In terms of creating values, opportunity costs involve participating in actions that purport one value in favor of another.
