Surname

Name:

Course:

Lecturer:

Date:

The Smartest Guy in the Room

In 2005, the authors Bethany McLean and Peter Elkind released a documentary film named The Smartest Guys in the Room. They had earlier published a book under the same title in the year 2003. The film examines the fall of Enron Corporation. This is a dramatic documentary full of characters brilliant at making and stealing company’s revenue, in addition to being greedy and ambitious .The story begins in 1985 when the Corporation was formed through the merger of Houston Natural Gas and Inter North, the Omaha, Neb. Natural gas Company. It brings out the thoughts, the motive, and fears of a number of the characters. The Enron Corporation, which is based in the movie, did not observe the basic accounting principles that are regularity, sincerity, full disclosure, non-compensation and permanence of methods.

Regularity was not observed in the Corporation because the enacted rules and laws of the corporation when it was founded in the year 1985 under the corporation act were treated as mere statements. They dismissed the laws since they were the major key players in running the business. The top management staff was the people engaged in scandals the most and they kept records of products that never existed and worked out balance sheets that did not balance since they had an inconsistent technique of analyzing the financial gain. Sincerity lacked within the company because the Chief Executive Officers employed proved to be untrustworthy; the founder was the first participant of insincerity. The auditors reported to him that the Chief Executive Officer named Louis Borget had been diverting profits to unidentified accounts and instead, he literally told them to continue making money. The Chief Executive Officer of Enron Energy Services also wasted shareholders’ money in activities that were immoral. He visited strip joints and sometimes he even invited them over to his office at Enron trading floor.

Enron Corporation did not observe the principle of full disclosure. The top executive managers were not accountable for the revenues ploughed into the business. Louis Borget diverted profits into other accounts. The second person was Lou Pai who wasted resources at strip joints and again he lost one billion dollars to the divisions he was running although Enron covered the case. Before Lou Pai left the company, he went away with 250 million dollars that he had gathered from the sale of stocks. The Corporation published contradicting records from what the corporation earned and there was no permanent system installed for assessing the returns earned and the expenses incurred. Consequently, the Corporations could not evict fraud. It published a lesser amount than what it made from its financial activities because the executives were wasting resources and walking away with billions leaving investors and employees with nothing.

The Corporation did not adopt a non-compensation policy as an alternative but it let its workers have a share of the company’s resources. Lou Pai went with 250 million dollars, the amount he had made after selling stocks. Slowly the company started losing its worth for it declined from the top seven most respected companies. Moreover, it performed poorly in the stock market. Had the company initiated the main basic principles it would not have suffered losses and critics from the public. Secondly, it would not have caused unemployment to the twenty thousand citizens it flayed off. However, the company applied few principles, accounted for some of its resources and made balance sheets full of suspense accounts.

Works Cited

Gibney, Alex, dir. Smartest Guys in the Room. Magnolia Pictures, 2005. Film.