People who are holding high positions in organisations always tried to induce power play in company decisions. If they fail to utilise their positional power they try to amend things with industrial politics. Power play and politics in industrial organisations has resulted in gaining profits and in some cases losses. WorldCom and Enron are the cases where power and politics were misused and both companies had to face the consequences.
When Enron, which was one of the top Fortune 500 companies, filed for bankruptcy in December 2nd 2001, the news came as a jolt to many of the investors. When the dubious account activities and scandal in Enron were revealed it came as a shock to the investors. US president George W. Bush had assured them by terming Enron's case as a rotten apple in the healthy corporate system. Despite of president's assurances many high profiled companies collapsed.
Enron Corp. was the result of merger between Houston Natural Gas and Internorth. There was a shift to unregulated energy trading markets from regulated transportation of natural gas. Enron was a Fortune 500 company and was in #7 in 2001 was deleted from New York Stock Exchange. According to the mangers of Enron who reviewed the accounts of the company, during California energy crisis Enron has kept undisclosed reserves of up to $1.5 billion in trading profits.
Enron came under fire from politicians of price gouging. The hidden reserves would have doubled the Enron's reported profits. It is also reported that Enron manipulated reports on reserves to have steady profit growth to Wall Street and credit rating agencies. The executives also claimed that the reserves were held back and used to fulfil the political and financial ends.
In 1990 Enron reported its total revenue as $10 billion and in the next subsequent ten years it grew by $101 billion. It emerged as one of the fast growing companies in the United States. The main reasons for its collapse is not due to the core energy operations but the company's new ventures in dot com sector and investments Internet and communication business.
According to investigators of the security of exchange commission gone into investigate the case, have interviewed witnesses to come to a conclusion that the methods or practices violated the laws for doctoring quarterly earning refers to start cookie jar reserves. The existence of Enron reserves puts strange twist to it.
The executives of Enron inflated profits and concealed losses with official balance sheet. Partnership in this scenario of reports that Enron has shown wrong accounts in December 2000, the company filed for bankruptcy protection but interviews with more than a dozen ex-Managers and Executives revealed that the Enron many a time paid the profits on trading to meet the needs of politicians and financiers.
The major portion of the gains were Shown on paper only on long term contracts only had it been the cash that could have put off liquidity crisis that led to its collapse. As per one of the former Executives, before a few months of Enron bankruptcy, the reserves were depleted.
It is common to use reserves to manage profits through it is unlawful. The former long time chairman and company's president chief executive were aware of the reserves and felt them proper. Judy Leon, Skilling's spokes