The 4 factors that caused the downfall of Enron in 2001 are:

1) Market to Market Method. 
 -The market to market method is the estimation of future income when a long term contract is signed. It estimated of future net value of cash flow, cost related to the contract was hard to predict. Enron was the first non-financial company, this mean that the estimated income from the project was included in Enron accounting even though the money was not yet received and if there were any changes. Result, company aggressive accounting had corrupted Enron books and had allowed the company to be far too optimistic its assumptions about the future profits.
  
 2) Competitive Working Environment. 
 -Enron is the most competitive work place, bonus and incentive come in bundle, if you are good enough just may be considered as one of the money-makers. Employee can get their bonuses after close a deal. So, everyone is aggressive to close deal no wonder it is good or bad. This is the factor that causes Enron fall because a lot of project is being made but no follow-up the due date to get their bonuses. 

 3) Special Purpose Entities. 
 -It had been created to hide the losses and fabricate earnings. This entity made it possible for Enron to underestimate and hide its debts and overestimate its equity. This causes the Enron stock began to fall and several SPEs began to collapse as a result of the drop of Enron stock price. 
 
 4) Key Player 
 -The CEO of the company, who misuse the company asset and Jeffrey skilling who manage the Enron online. This issue happen because that the company could not cover the amount of capital cost of their transaction. 

The usage of market-to market accounting is means hiding the financial losses of the trading business and other operations of the company. Therefore, the company had experiencing cash crisis due to they are mostly having paper revenue.

2) Enron Culture

The company was giving bonuses and incentives in order to motivate their employees. Therefore, the employees try to close deal quickly but not follow-up the case. The culture had cause employee with poor performance review and poor appraisal process being terminate thus increase the turnover rate in Enron. 

3) Special Purpose Entity (SPV)

There are various SPVs used by Enron to hide the accounting realities, rather than operating results. The company developed those SPVs due to they believe the SPV's value can reduce apparent counterparty risk. But those SPVs were failed at the end.

4) Key Players

The company was bankruptcy due to their employees thought they were smart and could get away from crimes. 

-The mark-to-market method requires estimations of future incomes when a long-term contract is signed. These estimations were based on the future net value of the cash flow, costs related to the contract were often hard to predict. In this case, the estimated income from projects was included in Enron’s accounting even though the money was not yet received. Besides that, if there were any changes such as additional income or loss it would only show up in following periods. Investors were receiving misleading information because of the deviation in the estimations. The company’s aggressive accounting had corrupted Enron’s books and had allowed the company to be far too optimistic in its expectations about the future profits. 

2.      Competitive working environment

-Bonuses and incentives in form of cash or stock options came in bundles, only if you were good enough and if you were considered one of the moneymakers in Enron. This made Enron a very competitive work place. Everyone was thinking to close deals regardless of whether it is a good or bad one because they got their bonuses right after a closed deal regardless of the result of the deal. A lot of projects being made with no follow-ups because no one wanted to be responsible of a done deal since what they want is just to close the deal and get their bonus. Performance review committee was also a factor why employees in Enron were so aggressive. It created a culture within Enron that replaced cooperation with competition. The committee gave ratings from 1 to 5 with 1 being the highest and the employee will get a good sum of bonus. If employee were in the lowest 5 to 6 percent of this rankings, that meant the employee is not good enough to stay in Enron and the employee might get fired at anytime.

3.      Special purpose entities

-Special purpose entities are created to hide losses and fabricate earnings. The entities made it possible for Enron to underestimate and hide its debts and overestimate its equity. When news about the debt hiding surfaced, Enron’s stock began to fall and several SPEs began to collapse as a result of the drop of Enron’s stock price.

 
4.      Key players of Enron

-Jeffrey Skilling was the one responsible in implementing mark-to-market accounting in Enron. Under his management, Enron launched EnronOnline, which is an Internet based service where contracts on energy commodities could be traded with Enron. In the end, Enron could not cover the capital costs of their transactions, which is also one of the reasons that sent the company to bankruptcy.

Andrew Fastow was the CFO of Enron who was the mastermind of the SPEs in Enron. He made the complex financial structures so that Enron could hide their losses and debts.

Rebecca Mark was the head of the failed businesses of Enron, which were Enron International and Azurix. Some of her projects were the $3 billion power plant in Dabhol, India and the expensive acquisition of Wessex Water. She also used the Enron Jet with her trips around the world. One executive even mentioned that whenever Mark attends a meeting, it costs the company at least $60,000 which would just cover her transportation.

Kenneth Lay, the Chairman and CEO of Enron, was staying away from the business and busy socializing. He and his family also misused the company assets. At one point, they were all using the company jets for personal travels. He was also involved in conspiracy and fraud in the company in order to hide its downfall.

 

 

1.   Mark-to-market Accounting

It led to schemes that were designed to hide the losses and make the company appear to be more profitable than it really was. Enron corrupted the company's aggressive accounting books and had allowed the company to be far optimistic in it is assumptions about the future profits. Cash is the necessity for every company to run the business. But, Enron had its revenue by paper. Lastly, the cash crisis had stuck Enron.

 

2.   Enron Culture

Enron is a very competitive workplace. Everyone was in a hurry to close deals no matter good or bad because right after a closed deal, they got their bonuses regardless of the result of the deal. It became a problem since they were a lot of projects being made but no follow-ups. No one wanted to be responsible of a done deal, they just wanted to close it and get their bonus.

 

3.   Special Purpose Entity

In order to hide losses and fabricate earnings, Andrew Fastow created multiple SPEs. The internal of the SPEs showed they were not independent since they were run by Enron employees like LJM run by Andy Fastow while ChewCo was run by Kopper. Hence, they had to disclose in Enron’s financial statements depressing earnings and debt level severely.

 

4.   Key Player

Enron has the bright and talented employees and everyone think they are so smarter than others that they think could always get away with “crime”. The reason why Enron will bankruptcy due to he could not cover the capital costs of the transaction.  He made the complicated financial structure so that Enron can hide their losses and debts.

Also, he and his family members misused the company assets for their personal travel. Not only that, he was also involved in conspiracy and fraud in the company in order to hide its downfall.

 

 

1)Mark- To-Market accounting

One of the factors that caused Enron company downfall in 2001 is the mark-to-market accounting system. Under mark-to-market rules, whenever a company has other energy-related derivative contracts which the assets or liabilities on the balance sheet at the end of a particular quarter, they must be adjusted to fair market value and the unrealized gains and losses are recognized in profit or loss for the current period. This means the estimated income from the project will misleading information to their investors because of the deviation in the estimated. A one-size-fits-all approach cannot work because require company to disclose all of the estimates and assumption underlying earning would produce disclosures that were so voluminous they would be of little value.

2)The Enron Culture

Enron is a company which contain high competitive in the workplace internally. The workers were motivated by the bonuses it was the reason the workplace become competitive. The workers in the company was selfish and self-concentered beccause they worker able to claim their bonuses and incentive once their closed up a deal. The worker only concentrate on the deal and the bonuses they might get but they forgot to put in effect in order to completing the job. It make the company contain a lot of project but no follow-ups on the project. This will lead the company with poor performance review and appraisal process and make the turnover rate increases.

3) Key Player

The company was housed by bright and talented employees. The employees think they are smart enough and able to get away with” Crime”.  For example, Jeffery Skilling is the one who thinks about mark-to-market accounting and create EnronOnline. At the end the costs cannot be cover and leads bankruptcy. The CFO, Andrew Fastow has established the special purpose entity that can hide the losses. In addition, the failure of the company also involved by the action of Kenneth Lay that too busy in socializing. He and his family misuse the company’s asset and Lay involve in conspiracy and fraud.

 

4) Special Purpose Entity

The special purpose entity is use to hide the losses and fabricate earning. Besides that, it also helping the company to underestimate they debts and overestimate its equity. The stock of the company began to fall when the special purpose entity began to collapse when the news of hiding the debt was surfaced. 

Mark-to-market accounting after the use of the opposite effect.The company's aggressive accounting of Enron's books have been damaged and allows the company in its assumptions are too optimistic about the future profits. Cash is necessary for any company to run and Enron mainly paper gains, so in 2001, they came to the conclusion that a cash crisis.

Enron's internal high competitiveness in the workplace.The workers are for bonus is a stimulus for the workplace become competitive reasons.The company's employees is selfish and self - concentered, their workers to claim their bonuses and incentives once close the deal.Workers focus on trade, they may get bonuses, but they forgot to put in practice in order to finish the work.It contains a lot of projects, the company but no follow up this project.This will lead to the company's performance evaluation and assessment process, the turnover rate.

For SPE law, they must meet three requirements: (1) at least a 3% stake in from outside investors, (2) the entity cannot control Enron, and (3) does not undertake any loans or other debt.

4.Key Players

The responsible person abuse of assets of the company in the financial statements and corruption.

 

Mark-to-market accounting after the use of the opposite effect.The company's aggressive accounting of Enron's books have been damaged and allows the company in its assumptions are too optimistic about the future profits. Cash is necessary for any company to run and Enron mainly paper gains, so in 2001, they came to the conclusion that a cash crisis.

Enron's internal high competitiveness in the workplace.The workers are for bonus is a stimulus for the workplace become competitive reasons.The company's employees is selfish and self - concentered, their workers to claim their bonuses and incentives once close the deal.Workers focus on trade, they may get bonuses, but they forgot to put in practice in order to finish the work.It contains a lot of projects, the company but no follow up this project.This will lead to the company's performance evaluation and assessment process, the turnover rate.

For SPE law, they must meet three requirements: (1) at least a 3% stake in from outside investors, (2) the entity cannot control Enron, and (3) does not undertake any loans or other debt.

4.Key Players

The responsible person abuse of assets of the company in the financial statements and corruption.

The special purpose entity is use to hide the losses and fabricate earning. Besides that, it also helping the company to underestimate they debts and overestimate its equity. The stock of the company began to fall when the special purpose entity began to collapse when the news of hiding the debt was surfaced. 

The responsible person abuse of assets of the company in the financial statements and corruption.

1)     Mark to market method

The bad accounting system where it need to make estimation of all the future values such as cash flow, costs, incomes, inventory that created a big loopholes for the top management to manipulate the accounting system. Therefore, misleading information were given out to all the investors, employees, suppliers. 

2)     Working environment 

The working environment is competitive instead of collaborative because of the cultures that all the employees are required to be rated and the top scorers are given a bundle of bonus and the lowest scorer will be fired anytime. The unhealthy cultures meet the theory of ethical egoism where individual acts to meet their self-interest and also get individual rewards and causes the downfall of Enron 

3)     Special purpose entities

Another loophole that creates the opportunity for Enron to manipulate the accounting system of the company. The entities created to handle assets either from funding or risk management. Enron has misused the entities to dodge the traditional accounting conventions and hide the debts. This system hides losses and fabricates earning of Enron by underestimate, and overestimate its assets and equity.

4)     The top executive(Key Player)

According to Lord Action, “Power tends to corrupt, and absolute power corrupts absolutely”. If the organization has unethical and unlawful top management, the cultures will flows to the whole organization and therefore the whole organization has become unethical an unlawful. The key players are overconfidence as if their crimes that had committed will not be caught. The top management executive such as Jeffrey Skilling, Andrew Fastow, Kenneth Lay, Rebecca Mark and many more had abused their power and authority of their position in the company for their personal benefits.

Mark-to-market accounting after the use of the opposite effect.The company's aggressive accounting of Enron's books have been damaged and allows the company in its assumptions are too optimistic about the future profits. Cash is necessary for any company to run and Enron mainly paper gains, so in 2001, they came to the conclusion that a cash crisis.

Enron's internal high competitiveness in the workplace.The workers are for bonus is a stimulus for the workplace become competitive reasons.The company's employees is selfish and self - concentered, their workers to claim their bonuses and incentives once close the deal.Workers focus on trade, they may get bonuses, but they forgot to put in practice in order to finish the work.It contains a lot of projects, the company but no follow up this project.This will lead to the company's performance evaluation and assessment process, the turnover rate.

For SPE law, they must meet three requirements: (1) at least a 3% stake in from outside investors, (2) the entity cannot control Enron, and (3) does not undertake any loans or other debt.

4.Key Players

The responsible person abuse of assets of the company in the financial statements and corruption.

Its practice led to schemes that were designed to hide the losses and make the company appear to be more profitable than it really was. So, enron has necessary of cash however Enron mostly had paper revenue and enron struck by cash crisis.

2) Enron Culture 

The company promises to give bonuses and incentives for motivate their employees. So the employees try to close deal quickly but not follow-up the case. This action has make that the employee has poor performance and its affect the image of employee and company 
 
 

3) Special Purpose Entity 

In order to hider
the losses, Enron created multiple SPEs. Enron's stock began to fall and
several SPEs had began to collapse. So, they had to disclosed in Enron's
financial statement depressing earning and debt level.

4) Key Players

The CEO of the
company, who misuse the company asset and Jeffrey Skilling was the one
responsible in implementing mark-to-market accounting in Enron. Under his
management, Enron launched EnronOnline, which is an Internet based service
where contracts on energy commodities could be traded with Enron. 

The conventional wisdom is that it was "innovative" accounting practices and their consequences that started the tide of losses that brought the energy giant down. Enron collapsed not so much because it had gotten too big, but because it was perceived to be much bigger than it really was in the first place. By decentralizing its operations into numerous subsidiaries and shell corporations, Enron was able to hide huge derivative losses that would have halted its growth much sooner if widely understood.

3) Corporate governance
Commentators attributed the mismanagement behind Enron’s fall to a variety of ethical and political-economic causes. Ethical explanations centered on executive greed and hubris, a lack of corporate social responsibility, situation ethics, and get-it-done business pragmatism. Political-economic explanations cited post-1970s deregulation, and inadequate staff and funding for regulatory oversight. A more libertarian analysis maintained that Enron’s collapse resulted from the company’s reliance on political lobbying, rent-seeking, and the gaming of regulations.

4) Preferential Treatment
While the internal integrity of the company remained thusly challenged, the facade was the exact opposite. The company leveraged political connections in both the Clinton and Bush administrations, as well as on Wall Street, for preferential treatment and the air of legitimacy that allowed it to perpetrate its frauds.

1.       Mark to market accounting

When Jeffery Skilling joined the Enron Corporation, he change the accounting system of the Enron Corporation from a straightforward kind of accounting. It is use the technique which is require to estimate the future income based on their future value of the cash flow. All the amount of the Enron Corporation are only estimated because their accounting are included all the money that haven’t received. The investors will be misleading by those figure.

2.       Special Purpose Entity

This is create for the corporation to hide their debts purpose. This is because, if the debt of the company is too high, all the investor will be avoid to invest their company. This might success help the company raise the funds from investors. 

3.       Enron Culture

The environment and culture of Enron Corporation is competitive. All their employee are affect by the bonus and incentive policy. They are care about their bonus and incentive and cause them are only want to hurry close their deals. It will cause their projects are not follow ups and loss their customer.

 

4.       Key Players

The employee of Enron are talent and everyone are thinks that they are so smart and smarter than other. Andrew Fastow is the CFO of Enron. He was made a financial structures to hide the debt of the company. Rebecca Mark had use the company jet with her trips around the worlds. Rebecca Mark also invest the money into expensive acquisition. The CEO of Enron’s family had withdrawn the company assets.

2) The Enron culture
- The company was giving bonuses and incentives in order to motivate their employees. Therefore, the employees try to close deal quickly but not follow-up the case. The culture had cause employee with poor performance review and poor appraisal process being terminate thus increase the turnover rate in Enron.

3) Special Purpose Entity
- The special purpose entity is use to hide the losses and fabricate earning. Besides that, it also helping the company to underestimate they debts and overestimate its equity. The stock of the company began to fall when the special purpose entity began to collapse when the news of hiding the debt was surfaced.

4) Key player
- The company was bankruptcy due to their employees thought they were smart and could get away from crimes.

Discuss the four factors that caused the downfall of Enron in 2001.

1.Culture

The culture in Enron is the bonuses and incentives in form of cash or stock options came in bundles if their employees are good enough or be considered one of the moneymakers.This makes their employees in a hurry to close deals as they can get their bonuses regardless of the result of deals.Under this working environment, the employees will become egoistic and selfish as they just focus on the career achievement rather than getting along with their colleagues. Usually, a company should implement a good environment to their employees as more cooperation between employees can help company more efficiency, but the Enron culture has replaced the cooperation with competition. Enron give a good sum of bonus to the employees that have higher rank and may dismiss the lower ranking employees.Therefore, this may cause the higher turnover rate and the employees may feel stress in Enron’ working environment and caused the downfall of Enron..

2. Key players

Everyone are think that Enron company are successful and did not involve themselves in a bad condition. In fact, the employees of Enron company are not smart in managing financial problems. The factor that caused the downfall of Enron in 2001 is the key players. Even their employees have creative thinking at launched the internet based services, but they did not consider about their financial status. They did not consider whether the company have the ability to undertake the costs. The Enron company’s employee which is Jeffrey Skilling, he able to develop an internet based service and he did not think that Enron company cannot cover the capital costs. At the end, it leads the company to bankruptcy. 

 

3. Special Purpose Entity

One of the reason that Enron will downfall is because of the special purpose entity.  Special purpose entity are legal entities to carry out a specific or temporary task purpose is to handle assets either by funding or by risk management. In Enron’s case, they use some special purpose entity to underestimate and hide its debts and equity. Not only hide debt, Andrew Fastow also created several SPEs and is run by Enron’s employee. Because of this, these SPEs should disclosed in Enron’s financial statements depressing earning and debt levels. But they did not do it, they abuse this structure to hide their losses and debt. 

 

4. Mark-to-market accounting

When Enron switch to mark-to-market accounting, it can gave Skilling and his company the financial reporting license to perpetuate fraud. However, the biggest problem for Enron may be cash flow differences in the long-term sales contract when they are immediately recognized. Although mark-to-market accounting can be recognition of income suddenly increases revenues and profits, but does not necessarily bring cash. Businesses cannot operate solely on taxes, and they must also generate cash.

Mark-to-market accounting mixed with the use of SPEs made Enron look financially healthily when it actually was bleeding, bleeding severely. Besides that, misleading information was given to the investors due to the accounting system, which eventually lead to decreasing stock price when the information about this started to surface. We think this was just a matter of time rather than a question about if they would get away with it. Sooner or later more and more of the bad investments had to be questioned because of its great sizes and also because at some time it have to show that there were short of real cash in the company. 

The problem found that excessive interest by management in maintaining stock price or earnings trend through the use of unusually aggressive accounting practices. Besides that, management setting unduly aggressive financial targets and expectations for operating personnel. This will cause inability to generate sufficient cash flow from operations while reporting earnings and earnings growth. Moreover, assets, liabilities, revenues or expenses based on significant estimates that involve unusually subjective judgments such as reliability of financial instruments.

In Enron, bonuses and incentives in form of cash or stock options came in bundles, only if you were good enough and if you were considered one of the moneymakers. This mentality made Enron a very competitive work place. Everyone was in a hurry to close deals because right after a closed deal, they got their bonuses regardless of the result of the deal. This became a problem since there were a lot of projects being made but no follow-ups. No one wanted to be responsible of a done deal, they just wanted to close it and get their bonus.

Performance review committee was also a factor why employees in Enron were so aggressive. It created a culture within Enron that replaced cooperation with competition. The committee gave ratings from 1 to 5, 1 being the highest and in Enron, the 1 mark meant that you will get a good sum of bonus. If you were in the lowest 5 to 6 percent of this rankings, that meant that you are not good enough to stay in Enron and you had to pack your things because you will lose your job anytime soon.

The company have the bright and talented employees. The employees think they are smarter than others that they think could always get away with “crime”. Besides that, they who are responsible with the misused in the asset of the company and corruption in financial statement. For example, they made the complex financial structures so that Enron could hide their losses and debts. Besides that, the employees of Enron were using the company jets for personal travels. Moreover, some of employees are involved in conspiracy and fraud in the company in order to hide its downfall.

In order to hide losses and fabricate earnings, Andrew Fastow created multiple SPEs. When news about the debt hiding surfaced, Enron’s stock began to fall and several SPEs began to collapse as a result of the drop of Enron’s stock price. For an SPE to legal, they have to satisfy 3 requirement that is at least 3% of the equity had to come from outside investors, the second is the entity could not be controlled by Enron, and last is Enron was not liable for any loans or other liabilities. An internal investigation of SPEs showed they were not independent since they were run by Enron employees. Therefore, they had to be disclosed in Enron’s financial statements depressing earnings and debt levels severely.

1111114488    VEEKNESWARAN A/L NARAYANAN

1121117554    VISHANTINI A/P VEERASINGAM

1122702900    ANGELINETAI A/P AKSENNAKAYO

1132703076    MUHAMMAD AMIRUL AZAMUDDIN BIN MUHAMMAD AZMAN

 

Discuss the FOUR (4) Factors that Caused the Downfall of Enron in 2001.

a) Mark-to-market Accounting

The company’s aggressive accounting had corrupted Enron’s books and had allowed the company to be far too optimistic in it is assumptions about the future profits. In the middle 2001, Enron had cash crisis.

b) Enron Culture

Enron provides the bonuses and incentives in the form of cash or stock options came in bundles, if only the employee was good enough and considered one of the moneymakers. Because of the mentality in Enron, everyone in the company was rushing to close deal as right after a closed deal, the employees will get their bonus based on the deal result. Since there were a lot of projects that being made, there no follow-ups that led to problem. No one wanted to be responsible of a done deal, they just wanted to close it and get their bonus.

c) Special Purpose Entity

In order to hide losses and fabricate earnings, Andrew Fastow created multiple SPEs. When the news about the debt hiding revealed, Enron’s stock started to fall and few SPEs started to collapse as a result of the drop of Enron’s stock price. An internal investigation of the SPEs showed they were not independent since they were run by Enron employees. Thus, they had to be disclosed in Enron’s financial statements depressing earnings and debt levels severely.

d) Key Players

Enron was housed by bright and talented employees and everyone thinks they are so smart or smarter than the others that they think they could always get away with ‘crime’. Jeffrey Skilling was the person who responsible in implementing mark-to-market accounting in Enron. Under his management, Enron launched EnronOnline, which is an Internet based service where the contracts on energy commodities could be traded with Enron. In the end, Enron could not cover the capital costs of their transactions. Andrew Fastow was the Chief Financial Officer of Enron, who mastermind of Special Purpose Entities in Enron. He made the complicated financial structures so that Enron could hide their losses and debts. Rebecca Mark was the head of the failed businesses of Enron, which were Enron International and Azurix. One of the executive stated that whenever Mark attends a meeting, it costs the company at least $60,000, which would just cover the transportation only.  Last but not least, the Chairman and CEO of Enron, Kenneth Lay led to Enron’s bankruptcy. He was too busy socializing, he and his family misused the company assets. He also involved in conspiracy and fraud in the company in order to hide its downfall.

1142700456        Angel Yam Sue Ying

1142700493        Chia Chung Sheen

1142700459        Tan Wei Xi

1142700483        Tan Sie Ying

1132700931        Chang Hong Hui

This accounting policy is an aggressive policy where only financial company used this policy to manage their accounting system. When a long-term contract is signed, this policy requires estimation of future incomes which were based on the future net value of cash flow, and this caused Enron to be far optimistic in their assumptions about the future profits and lead to lacking of cash turnover in the company. Investors were given misleading information because of the deviation in the estimations.

The Enron Bad Culture

There’s two bad culture disseminated in Enron: first, employees were trained to be aggressive of the bonus after each case were closed. They do not care about the procedure or the outcome of the projects and this leads to none of them follow up their projects and left it idle after close case. Secondly, employees were trained to be competitive with one another, they fight for the highest ratings for a good sum of bonus. In Enron culture, if an employee got more than 5% of ranking, this indicate the entire employee will be fired soon. 

Special Purpose Entity (SPE)

SPE are legal entity that are created only to carry out a specific or temporary task. Enron’s SPE is used to dodge the traditional accounting policies and hide debts. This caused them underestimated the debts and overestimated the equity. For an SPE to be legal, Enron must has at least 30% of equity sourcing from outsiders, the entity could not be controlled by  Enron and Enron was not liable for any loans or other liabilities. Then, Enron’s stock price began to fall when the news reported that Enron hid their debts and investigated that Enron was run by its own employees. 

 

Employees abused the assets and facilities in Enron for own goods. Jeffrey (CEO) who implemented mark-to-market accounting policy, Andrew (CFO) who mastermind of the Special Purpose Entities, Rebecca who abused her power and authority for her personal benefits, Kenneth(Chairman) who busy socializing and ignore the business from bankruptcy. They are not only the person who were responsible for the bankruptcy and failed of Enron, in fact, everyone in the company must pay responsible and guilty to this case. 

Enron’s workplace culture is very competitive.  The incentive and the bonuses is  their aim without follow up the done deal. Enron create the culture that the worker always needs to focus in high performance. No one want to responsible of a done deal, they just wanted to close and get bonuses.  Company will rate the performance, the worker with high performance will get high bonuses, if not they may loss the job in anytime because is useless in Enron.

The legal entities that created only to carry out a special task. In Enron’s case, the SPE were not only used to dodge the traditional accounting conventions but also they could hide their company’s losses and fabricate earning. When the news about the debt hiding surfaced, Enron’s stock began to fall and several SPEs was collapsed as a result of the collapse of Enron Company. 
4) Key Player

Enron has a lot of the talented employees such as Jeffery Skilling, Andrew Fastow and Kenneth Lay. They give a good impression to public that everyone thinks that they will not involve in “crime”. Jeffery Skilling is the person thinks about mark-to- market accounting, he create EnronOnline. In the end the costs cannot be cover and leads bankruptcy. The CFO, Andrew Fastow has established the special purpose entity that can hide the losses. The failure of the company also involved by the action of Kenneth Lay that too busy in socializing. He and his family misuse the company’s asset and Lay involve in conspiracy and fraud.