The story of the extreme rise and the following fall of the Enron Corporation still interests many people. Not everyone is aware of all the circumstances and factors that affected the company’s struggle, and only some people know how many resources, including places and people, were involved in the corporation. The record-breaking bankruptcy of “the seventh largest company in the United States and the sixth largest energy company in the world” was surprising for the society (The Nigerian Professional Accountant, n.d., para. 2). This company was founded in 1985, and its first year in the market was already characterized by a huge loss and an enormous amount of debt. However, thanks to the changes in American governmental policy related to the natural gas industry operations, Enron managed to rise. Now, it is necessary to analyze this case and evaluate the fatal mistakes that the corporation made.
There is an extended number of different theories and assumptions about the reasons that Enron struggled and then filed for bankruptcy. First, the projects that the corporation invested in turned out to be too risky and failed, which resulted in the inability of Enron to pay its debts (The Nigerian Professional Accountant, n.d.). Other issues like abuse of accounting and utilization of SPEs to hide the corporation debt added to the major problem that may be defined as an identity crisis. As noticed by researchers, there were two ideological systems that competed and dictated how Enron was supposed to function (The Nigerian Professional Accountant, n.d.).
The first ideology, known as the asset-light strategy, was supported by Jeffrey Skilling, while Rebecca Mark was a proponent of asset-rich infrastructure development philosophy. Both leaders could not agree on whether the return on investments was a long-term process. Their actions were too different and competing, but many projects in which Mark invested large amounts of money failed later, adding to the corporation’s huge debt. Overall, this disagreement is the main reason why the Enron Corporation has been struggling for many years.