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Governance Failure at Enron - International Business and Finance

Autor:   •  January 18, 2012  •  Case Study  •  835 Words (4 Pages)  •  2,868 Views

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INTERNATIONAL BUSINESS AND FINANCE -1

Governance Failure at Enron

Enron Corporation was an American energy company based in Houston, TX Before its bankruptcy in late 2001, Enron employed approximately 22,000 employees and was one of the world's leading electricity, natural gas, pulp and paper, and communications companies, with claimed revenues of nearly $101 billion in 2000. (Enron Wikipedia) Throughout the years Enron was a successful profitable organization, or where they? Many discovered and media has released inflated assets and profits that were fraudulent or did not exist.

A three question case taking from the Enron mini case reading has lead us team members to believe accurate information of: internal and external governance system that has failed Enron, prevention to the problem from the stakeholders and corporate governance system sides, and if other trade firms in the US can operate effectively like Enron’s system and would it fail. The perceiving is as follows:

1. Which parts of the corporate governance system, internal and external, do you believe failed Enron the most?

First and foremost, it was the internal governance system that failed Enron the most, the leadership/management team failed to act with all the actions that people in multi level positions where doing, although there are guidelines set by external governance, if the leadership is corrupted, and it has the support of most key figure employees, in an accomplice type of way, and if the company leadership wishes to engage in deceitful activities, they will find a way to do it. Enron’s senior management team was responsible for the formulation and implementation of the company’s strategy. This team was also responsible for execution of the company’s future. The CEO, CFO and COO are the most knowledgeable of the business as well as the creators and directors of its strategic and operational direction. Enron’s fall was mainly due to fraudulent accounting by Arthur Andersen on whom the general public relied on for accurate information. Accountants and auditors are the primary providers of information. Due to the complexity of the business, there can always be found a way to keep the dirty laundry from coming out, and basically lie about profits, and it makes it very difficult for external governance to keep up and discover all wrong doing.

2. Describe how you think each of the individual stakeholders and components of the corporate governance system should have either prevented the

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