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Unformatted text preview: P a g e | 1 Amy Tuczynski Patrick Vorce Drew Aslin Public Relations (Case Study) Case 5.2Enron De-energizes: Faulty Investor Relations Contributes to a $60 Billion Failure Overview Enron, a company that made Fortune's Most Admired Companies list for six consecutive years, [became] a synonym for corporate fraud (Haymarket Business Publications Ltd., 2002). By falsifying publicly reported financial results and selling large amounts of stock at a false value, the worldwide energy company became one of the largest corporate bankruptcies in U.S. history (Guth, D. W. & Marsh, C., 2004, p. 98). A large percentage of investors believed these actions to be intentional, and that they were. Being seen as a powerful company was one main goal that Enron strived to achieve; they enjoyed this sterling image for quite some time: Enron is one of the worlds leading electricity, natural gas and communications companies. The company, with revenues of $101 billion in 2000, markets electricity and natural gas, delivers physical commodities and financial and risk management services around the world, and has developed an intelligent network platform online business (Guth, p. 98). However, this reality changed dramatically, along with Enrons public image after a series of unfortunate events. Reputation management is the most critical part of any corporate communication function (Argenti, P., 2007, p. 48) in which identity and image fall. Not only were Enrons investors hurt by staggering financial losses, but Enrons own employees, the most important P a g e | 2 asset in an organization suffered a trifecta of devastation: loss of savings, loss of job, and loss of trust in a seemingly rock-solid organization. Senior managers sold their stock but assured employees that retirement funds were good. Eventually, employee savings were wiped out as executives interests and gains were held highest and were protected from the blood-letting. Employees and investors expected facts, not wishful thinking, but Enron proved to them that credibility and truth were their missing pieces. Problems There was never a clear or understandable picture of Enrons finances. Securities analysts joked about not being able to make sense of Enrons complicated financing (Guth, p. 98), but because nobody questioned the bottom line, Enron was able to get away with far more than they should have. The company did post answers to frequent financial questions on their company website, but the answers aligned with their finances and were impossible to follow. company website, but the answers aligned with their finances and were impossible to follow....
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This note was uploaded on 04/28/2008 for the course STCM 232 taught by Professor Flowers during the Spring '08 term at Ithaca College.
- Spring '08