Enron Paper Essays (1440 words) - Enron Scandal, Accounting Scandals

Victoria Sanson Sociology 332: Sociology of Organization Professor Deng April 26, 2018 Enron Scandal Modern formal organizations have taken over the traditional organizations. The modern formal organization has split the atom of private property. This private property consists of two rights, the right to use the property and the right to benefit from the use of the property. Modern organization also consist of two groups of actors, the agents hold the usage rights and the principals retain the right to benefit from that use. While in traditional organizations, there is no such separation between the right to use and the right to benefit from the use, between principals and agents. The modern formal organization is little more than a buddle of contracts signed by multiple principals and multiple agents. Principals are the buyer of the goods or services and for most companies the principals are multiple owners, such as the shareholders and taxpayers. These people want to accomplish a certain goal but lack some of the skills or capacities necessary to do so. In order to accomplish t his goal the principals must find other people with those skills or capacities and obtain their service in return for remuneration of some sort. The agents are the sellers of the goods or services. The agents are all those employed by the corporation, such as CEO and production workers or by the governments, such as the governing officials and employees. Throughout the late 1990s, Enron was almost universally considered one of the country's most innovative companies. Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 20,000 staff and was one of the world's major electricity, natural gas, communications and pulp and paper companies, with claimed revenues of nearly $101 billion during 2000. Fortune named Enron "America's Most Innovative Company" for six consecutive years. At the end of 2001, it was revealed that Enron's reported financial condition was sustained by institutionalized, systematic, and creatively planned accounting fraud, known since as the Enron scandal. Enron is a modern formal organization that was made up of many different contracts. These contracts ranged from electrical, gas, to political relationships. One on the main contracts that Enron had was a natural gas call Enron Oil. Enron made a bet with two different oil trades and due to Enron's political ties with the Bush administration, Enron always won the bet. Enron had one of the most significant relationships between a presidential family and a single corporation. The executives had a connection to the Bush administration, which help Enron secure billions of dollars in government subsidies. This was great for Enron on betting on oil. Once Enron started to make money of their oil industry, many of the higher ups in the company began to put company profit into their personal bank accounts. Along with this action they began to gamble all of Enron's reserved trades. Executives being to manipulate money to make it appear as though there were winning in the gamble. Another major co ntract that Enron had was PGE Electrical. PGE was marketed in California and all profit that PGE gain became profit for Enron. Once Enron began doing business in California things were not always that bright. Enron began creating artificial power shortages in California, which helped trigger an energy crisis in 2000 and 2001. Electricity traders at Enron drove up prices during the California power crisis through questionable techniques. This event cost residents billions of dollars in surcharges and the yearlong energy crisis cost California alone 30 billion dollars. The agents of Enron have maximized their utilities at the expenses of principals' interests. These agents consistent of the top executives of Enron. These executives played the company for their own advantages without worrying about the outcome for the rest of the company. These people have forged the public records of their income to make the public and their shareholders believe that Enron was bringing in more money than they actually were. Marked to Market is the changing of numbers on the public record. This allowed Enron's profit to be whatever the people at Enron wanted it to be. The agents were putting portion of company money in