Shareholder value was being diluted. It was worse than just being dishonest: stock options provided managers with strong incentives to get the value of their stocks up quickly - what mattered was not long-term strength but short-term appearances. Corporate officers responded to the incentives and opportunities. Over the last 15 years, executive rewards in America have soared, and so have stock prices of those companies.
[...] The recent Enron collapse has sent shockwaves all over the financial world and raised serious questions regarding corporate governance: How could America's seventh largest corporation suddenly declare bankruptcy when their stock price was so high? How did this occur? Currently, there are more than 10 separate committees investigating possible wrong doings and illegal activities, such as fraud and insider trading. Information suggests that Enron made its money by falsifying many documents. By cooking the books and throwing their debt onto other recently established companies they hid losses and increased their revenues and profit, Enron executives were able to keep the ratings of their companies at very high levels. [...]
[...] There is a lack of trust and cooperation. People often hide important information from each other and even sabotage each other's efforts to ensure that only they will come up on top. There is no regard for the larger picture and the overall goal of the company. It is everyman for himself. Both management and workers are obsessed with their own survival and self-interests. As a consequence, the organization is fragmented and there is a lot of waste of valuable resources because of duplications and sabotage. [...]
[...] In this kind of culture, the company either disintegrates or becomes an easy target for a hostile takeover. In a dishonest and corrupt culture, greed is good and money is God. There is little regard for ethics or the law. Such attitudes permeate the whole company from the top down to individual workers. Bribery, cheating, and fraudulent practices are widespread. Creative accounting and misleading profit reports are simply day-to-day routine work. When management is blinded by greed and ambition, their judgment becomes faulty and this allows them to break the law without actually acknowledging to themselves of what they are doing. [...]
[...] One of the defects of the culture which was present in Enron is the fact that the big boss alone makes all the major decisions behind closed doors. Even when the decisions are harmful to the company, no one dares to challenge the boss. This was the standard in operating the company; additionally, with complete disregard to the employees and what consequences they should face. In this kind of culture, employees are to be controlled and manipulated. Workers are motivated by fear rather than love for the company or passion for the work. [...]
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