The Enron scandal let to the development of the Sarbanes Oxley act. They went from a $68 billion company to nothing in just a few weeks. The stock was increasing in price at an unheard of rate. There was high motivation for them to manipulate Enron’s statements to show a profit. Arthur Andersen received one million dollars a week from their largest client Enron.
ENRON THE SMARTEST GUYS IN THE ROOM SCRIPT MOVIE
The concept of different ownership was demonstrated in the movie when the relationship between Enron and Arthur Andersen was explained. Enron was making their books look favorable while they were going into debt. Because Arthur Andersen relied on Enron for their income, they were more willing to participate in unethical practices to keep Enron afloat. I am reminded of this principal from my accounting classes. When I watched the movie Enron: The Smartest Guys In the Room I was reminded of the principal of remaining independence from their auditor. As one PGE employees said, his retirement account, mainly Enron stock, went from a value of almost $350,000 to being sold at $1200! The whole story is a perfect example of what money can drive people to do and how devastating the violation of fiduciary responsibilities can be. The involvements with Fastow’s partnerships and structured finance practices are what created these reporting difficulties, Enron’s debt was placed in many different specialty companies to create the image of a financially sound company that continuously beat estimates. When asked why they could not produce these statements in a conference call Skilling called the analyst an asshole, a big red flag. The signs got more and more evident as eventually Enron could not even produce a cash flow statement and a balance sheet. If you ask me that is the ideal investment to stay away from, if you can’t describe the business model there is no way to properly value the investment. As analysts described it, “it’s a black box”, no one knew where the earnings came from, and they just took it on good faith. The signs were there long before the collapse, you have to question a company that repeatedly reports earning above estimates yet cannot describe how they make their money. It seems as if Skilling was too clever for his own good. It was also surprising to me how much the collapse of Enron resulted from their “idea man” Jeff Skilling. I was always aware of the scandal at Enron but I never knew what exactly went on. It’s important to be smart like Lay, Skilling, Fastow, and the other executives and employees, but you should use those smarts to come up with solutions that are honest and ethical! However, because they used their brains to achieve unethical numbers, nobody will ever remember them for being so smart! I definately think there is a valuable lesson to be learned here: In our careers we will be faced with many opportunities to cheat, but we do, we will eventually get caught and nobody will ever care about any of our other achievements. In fact, everyone at Enron was the best and the brightest. I think they were strategic thinkers, too. Those men were very smart and knowledgable about business. Strangely enough, one of my first thoughts was: Hopefully I can be as smart as Skilling and Lay someday. It was very, very interesting to finally get an idea about what went wrong. However, I’d never really taken the time to look up exactly what happened there. This movie really blew my mind! As an accounting major, Enron has been brought up in nearly every single one of my classes. For most people, Enron is already history- Something that happened in the past. What really happened at Enron? Were the activities and events at Enron any different from those in other big corporation? Why did nobody speak up when they were making money off Enron stock? How did Enron top management manage to fool the media, journalists, employees, and the public for so long? I doubt these questions will ever be completely answered. The movie combines insider accounts, C-span clips, voice-over effects, and corporate audio and video tapes to present the why, how, and to what effect of the Enron saga. It introduces us to Ken Lay (“Kenny Boy”), Jeff Skilling (“a former nerd”), Andy Fastow, and others who were the top dogs at Enron. history- the unexpected sudden collapse of one of the largest corporations in the world. It examines one of the biggest corporate scandals in the U.S. The movie- Enron: The smartest guys in the room (2005)- is based on a book of the same name by Fortune reporters Bethany McLean and Peter Elkind.