Abstract:
Its workers felt the Effects of Enron Business Deal maximum. In the entire episode of Enron debacle, these 22000 strong Enron workforces saw complete depreciation of their savings as well as pension. This article would help the reader to have an insight in the pathetic situation of the workers during the entire Enron saga.
Enron Success Story - In a nutshell
Enron started its journey as electricity and gas transmitting as well as distributing company with the name Northern Natural Gas Company. During the 1990s it grew at a rapid speed and was adjudged "America's Most Innovative Company" consecutively between 1996 and 2001. Some of its highly profitable ventures were: -
- Online trade of several derivative products on petrochemicals, power, weather and many more.
- Broadband services
- Wholesaling of electricity and natural gas
- Transportation of energies like natural gas through pipeline services
Enron Business Deals
- Faulty investment in Internet network business.
- Foreign investment deals made in the energy projects went awry.
- Fall in energy prices. It was the next blow to the company that affected its profit-earnings significantly.
- Business deals made with special-purpose-entities for isolating its financial risks from the mother concern. This helped Enron to inflate its revenue as well as profit earnings and dupe its investors and workers.
- Failed deal between Enron and Dynergy. Dynegy backed-out from buying Enron at the last moment after closely scrutinizing its balance sheet.
Enron - From Riches to Rags
Accounting fraudulency helped Enron to over-inflate its profit margin. This in turn pushed the stock prices above US$ 90. But after revelation of the accounting scandal, its price came down below US$ 1.
Aftermath of Enron Debacle on Workers
- Just after announcement of bankruptcy, in the month of December 2001, 4000 workers (almost 20% of its total worker strength) were laid off as a cost-curtailment measure.
- From 29th October 2001, Enron's management made their employees lock their money with the Enron stock for sixteen long days even when the stock price shed 1/3rd of its value.
- The superannuation pension plan of the Enron workers, under 401(k), was subject to market risk and was not fixed pension guarantees. Employees, who had also locked their pension, savings and college fund of their children with the stock of Enron, saw a historic and massive depletion of their asset value along with the company's downfall. This left these workers high and dry after their blue-chip stock plummeted to a penny stock. The employees through Enron's retirement pension plan 401(k) lost a total of US$ 1.3 billion in aggregate.
- After the failure of Enron reorganization attempt through infusion of funds from its lenders, Citibank group and JP Morgan Chase, all the workforce of around twenty two thousands were sacked.
Conclusion
Workers were the biggest loser in the whole saga of Enron fallout because on one hand they lost their job and on the other lost their savings that were attached with the Enron stock price. In fact, the top notch of Enron management transferred their financial risk from themselves to the workers.