It would be within the next year that Enron would begin to go through some major financial difficulties. It will be argued here that the basic tenets of a successful company require three key aspects: profit; sustainability of innovation; and good leadership.
First, one should begin with a short history of Enron. In the case of the Houston-based Enron Corporation, a multi-billion dollar institution encountered a crisis situation. The denial of top corporate executives Kenneth Lay and Jeffrey Skilling led to Enron making excuses such as blaming Arthur Andersen, its accounting firm, for its failure. An integral part of understanding Enron's demise comes from learning a little bit about the company and how it grew over the years to its existing status. Houston Natural Gas merged with InterNorth, in July 1985, to form the Enron Corporation. Over the next fifteen years, Enron expanded rapidly, establishing many new businesses worldwide.
The first sign of an innovative corporation is that it shows a profit. In about fifteen years, Enron grew from nothing to being America's seventh largest company. Enron employed over 21,000 individuals in more than forty countries. Enron's executives transformed this company, without actually building a company that made significant business profits. By doing this, Enron executives could exaggerate the company's cash flow. To create these profits, Enron's executives also used many accounting procedures that seemed to confuse watchdogs-and, to make themselves look better, they blindsided everyone who thought that Enron was on top of the world, by creating hundreds of fake companies. To prevent anyone from seeing any loss from Enron, they would transfer their debt to the fake companies. By doing this, Enron's debt would seem a lot smaller than they actually were. Like many large companies, Enron had its good and its bad side. In 2002 Enron's bad side was exposed to the nation. So the question is raised, what did Enron make' Enron didn't really make anything. Enron acted as the "middleman" in large natural gas and electricity deals. Enron always admitted it was hard to define their "business" in one sentence, but they finally came up with an explanation that they make commodity markets so that they could deliver physical commodities to their customers at a predictable price. Enron seemed to have trapped employees that worked with the company. The employees were forced to put their pension money into the Enron stock, which was overvalued. The employees at Enron were just doing their jobs, and in fact should not be held to blame.
"Such high turnover [at the top of corporations such as Enron] suggests that the real problem isn't a lack of innovation-it's sustained innovation."1 Although many of the future business people attend curriculums that require business law classes, the Enron scandal has proven that corporate corruption is alive and well. Also, the company proved that it could not sustain its innovation over time, because its biggest innovation, mark-to-marketing accounting, was a fraudulent innovation. It was brilliant, in the sense that profits could be estimated and then banked upon, but it was also an illegal practice to put profits on the books that were not truly there. In addition, Enron