Running head: ENRON 1

What could we have done better about Enron.

Name

Institutional affiliation
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What could we have done better about Enron?

Enron was a merger between InterNorth and Houston Natural Gas. It was formed in 1985 (Chen,

2019). Kenneth lay who was the CEO of Houston Natural Gas, became the CEO of the corporation and

immediately rebranded it into an energy trader and supplier. The primary importance of a merger is to

improve the financial position of the merging companies. Initiating proper financial control and

management, ethical decision making, adequate hedging practices and also giving proper financial

literacy to the employees could have prevented Enron from failing.

Several things could have been done about Enron scandal. According to Lagace (2008), there

should have been improved governance and proper control and management of finances in the

organization. In her work, Lagace also stated that the firm should have employed ethical decision

making and should have also implemented good administrative practices that could have prevented

moral drift and reckless gambling. Also, the management should have ensured fluid and transparent

markets for their commodities, i.e. natural gas, that was affected by highly insufficient delivery systems.

Hedging could have been another good option for the corporation to prevent its failure, but its hedges

were not real because it was hedging with itself. If the firm could have only applied these practices, it

could have succeeded as a significant energy trader and supplier.

There are also other ways that could have led to the betterment of Enron. According to Mack

(2011), the Enron employees should have given proper financial literacy education, this could have

helped them to gain knowledge about diversification. The organization should have also tried to use

variable prepaid forward contracts: by agreeing to sell a certain number of shares at some point in the

future. With basically proper financial management by the firm, the company could have achieved a lot

in the market which could have been increased sales leading to increased profits.
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For any company to succeed it should ensure that all the practices are put into use by the

management and also the employees. This can be achieved by initiating proper financial control and

management, good decision making, proper hedging practices and also giving proper financial literacy to

the employees. With all the said practices put into use, Enron could have improved it’s financial position.

What could be the present position of Enron if it could not have failed?
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References

Chen, J. (2019, Sep 3). What was Enron? Investopedia. Retrieved from

www.investopedia.com/terms/e/enron.asp

Mack, R. (2011, May 25). How the Enron disaster could have been avoided. HuffPost. Retrieved from

www.google.com/amp/s/m.huffpost.com/us/entry/206026/amp

Lagace, M. (2008, Jul 7). Innovation corruption: How managers can avoid another Enron. Working

knowledge. Retrieved from www.hbswk.hbs.edu/item/innovation-corruption