Reacting on Impulse

In class we discussed the connections between the five readings.  I felt that the connection between Enron and Short-termism was strongest.  Short-termism deals with managers or shareholders allowing short-term considerations override the desirable long-term growth of a corporation.  This is exactly what we witnessed with Enron.  Enron was a market leader and had several opportunities to boom their revenues right away.  By making several strategic misadventures, Enron found themselves’ with their tails between their legs.  A question brought up in class was if it was a good idea for Enron to diversify its gas.   What I thought about immediately is how Enron ended up losing its investor trust when they had to make restatements.  By diversifying gas, it is making their financial statements that much more complex.  It’s pretty bad when the CEO of your company doesn’t even know the financial structure of their own business.  This is why I think short-termism relates so well to the Enron case.  Their eyes were just so big when they had these opportunities to make fast cash right in front of them that they didn’t even consider the long-term effects.

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2 Responses to Reacting on Impulse

  1. Alyssa Haglund says:

    I would like to argue that Enron considering gas was perhaps a long term thought. Gas would diversify their products allowing them more opportunities to support themselves if one product industry were to take a dive. However, I completely agree that the false financial statements and excuses for mishaps were complete short-termism, attempting to cover up the failures.

  2. aml028 says:

    I agree that Enron entering the non-energy markets was not smart but I feel Enron entering the gas and electricity markets was smart. If Enron didn’t falsify their financial statements then they might have a monopoly on all the major markets of energy. I feel like investing in the energy market is thinking long-term and not in the short-term. As technology and the world’s population continues to grow, the demand for energy will also grow. If Enron had a hold of the energy market then the future would have looked very promising for them.

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