Business Failure

This paper will aim to discuss the death spiral that happened to ENRON from the late 90’s to the early 2000—that is, in accordance with the parameters of organizational behavior theories. The mentioned discussion will constitute reasons why the six-time “most innovative company” company filed bankruptcy, why despite the staggering rise of its stock price the then second largest company in the world created had to come up with an “innovative” method of manipulating its financial statements to hide more than twenty-five billion worth of debts. Also, this paper will aim to discuss how the concept of organizational behavior theories could have prevented the infamous Enron collapse.

ENRON Business Failure
There is a classical story of boom and bust cycle among companies in the world market since time immemorial. However, this was not the sole reason why Enron spiraled into a catastrophe in 2001 feeding the media and the world market scandals upon scandals. The former darling of the Wall Street was once just a small company in Nebraska that ballooned into the fifth largest company in the United States. Over the course of years, many have attributed the downfall of the company to its questionable publication of its financial standing. The scandal of the company’s devious accounting methods had overshadowed an equally important reason why its failure eventually become one of the most shocking and beyond solution disaster in the world economy to date. In fact, a host of solutions had been proposed since the culmination of the scandal that included greater shareholder empowerment, shareholders’ board of trustees, privileging accounting principles over accounting rules, a reduction of outside regulation of accounting practices and requiring auditors to judge the substance of disclosure (and, of course, most notably the Sarbanes-Oxley legislation) (Free, Macintosh, and Stein, 2007).   Clearly, the role of management, business ethics, culture and environment had...