Enron and Other Corporate Fiascos: The Corporate Scandal Reader, 2d (original) (raw)
The Enron Scandal a Decade Later: Lessons Learned?
The year 2011 has marked a decade since the Enron collapse, considered the most emblematic corporate scandal worldwide. Despite its importance, few studies provide an integrated analysis of the underlying failures that allowed Enron’s debacle, going beyond the traditional view that reduces the case to a mere "accounting fraud". Few studies also evaluate the main lessons from the Enron scandal in perspective, by comparing its common causes with corporate scandals that emerged during the global financial crisis in 2007-2008. These are the gaps I aim to fill. I conclude that Enron’s accounting manipulations, rather than being the cause of the problems, were the consequence of managerial failures and wishful blindness by its stakeholders. I also show that some lessons from Enron have not been fully internalized by companies worldwide, since most of its underlying causes are similar to those of several corporate scandals that emerged a couple of years later.
Unlearned lessons from the past: an insider's view of Enron's downfall
Corporate Governance: The international journal of business in society, 2009
Purpose-The purpose of this paper is to capture an insider's view of the organizational culture and management practices that contributed to the downfall of Enron. In light of the current worldwide financial and economic crisis, this article aims to highlight some of the unlearned lessons from the past. Design/methodology/approach-A qualitative interview case study was used for the basis of this paper. Findings-This article shares an insider's (former vice president's) insights related to the practices and culture that led to Enron's unethical decisions and strategies. It discusses one man's view of the history of Enron, as well as what should have been learned and applied to the global financial industry to help to minimize or even avoid today's painful economic crisis. Practical implications-Six main causes of unethical behavior for individuals in organizations are outlined, and important lessons learned are presented. The article also discusses the importance of reflecting and remaining inwardly vigilant, while outwardly thinking of and serving others. Originality/value-The information for this article was based upon an original interview.
Almost a decade later : Have we learned lessons from inside the crooked E , Enron ?
2010
Almost a decade after the collapse of Enron, it is time to ask what lessons have been learned from the unethical conduct of the organisation. Enron was the seventh largest corporation in the United States, with a Code of Ethics published in book form (Enron 2000) and distributed to all employees. With Enron’s collapse, unethical and illegal behaviour at the highest levels of the corporation emerged. In the years since Enron’s demise, public trust in business has continued to decline (Edelman 2009). What can we learn from the events inside Enron to halt the decline of public trust in business? This paper analyses Enron’s 64page Code of Ethics and compares that document against the company’s operation and unethical behaviour. This study seeks to discover why the Code of Ethics failed by looking closely at the organisational culture inside Enron, extending the research of other scholars on this topic (Sims and Brinkman 2003) and updating it with historical context. Rather than being se...
ENRON AND ARTHUR ANDERSEN: THE CASE OF THE CROOKED E AND THE FALLEN A
Outside the US, the failures of Enron and Arthur Andersen remain puzzles. How could the accounting and audit failures associated with Enron and Arthur Andersen happen in the US where auditing is sophisticated, accounting principles are strong, and disclosure is emphasized? This is a teaching case for persons outside the US to review the financial reporting and auditing issues related to Enron and to explain the regulation of accounting and auditing in the US. It has broad implications for corporate governance and accounting regulation in other countries as well.
Enron’s Incremental Descent into Bankruptcy: A Strategic and Organisational Analysis
Long Range Planning, 2003
Enron's senior management has become the byword for all that is bad with corporate America. Yet there has been hardly any in-depth analysis of what contributed to the strategic mistakes that resulted in the company's downfall. This paper is not about the cover-ups but an analysis of the antecedents of these strategic mistakes. The paper demonstrates that the core successes of Enron were rooted in its ability to manage risks in complex transactions. Yet these very risks that ultimately brought Enron down. In short, this article is about what we can learn about managing risks in the increasingly complex business environment. k
Corporate Scandals of the Earlier 21st Century: Have We Learned the Lessons?
SSRN Electronic Journal, 2000
The Enron's case Summary of the firm About 30.000 employees in January 2001 7ª largest U.S. company by revenues at that time Had received for six consecutive years the award as most innovative company from Fortune's publication -Most Admired Companies‖ Its CFO Andrew Fastow received in 1999 an award as the most creative CFO of the year from CFO Magazine One of the 50 fastest growing US firms, by far the largest of the group A lot of power and political influence: Henry Kissinger and James Baker among its Washington lobbyists Nelson Mandela and Alan Greenspan went to Enron's headquarters to receive the prestigious -Enron Prize‖ July 1985: Enron is born from the merger of Houston Natural Gas and InterNorth 1986: Kenneth Lay, PhD in economics with humble roots is appointed Enron's CEO and Chairman. He hires McKinsey to help developing Enron's new strategy. McKinsey allocates a consultant named Jeffrey Skilling, MBA from Harvard. Skilling's background was in finance. His recommendation: transform Enron into a -Natural Gas bank‖, taking advantage of the then recent deregulation of the market for the purchase and sale of gas 1989: Enron becomes the largest trader of gas distribution in the US and the UK 1990: Lay creates a new division called Enron Finance. Skilling is hired to run it. He conditions the acceptance of the job to Enron's adoption of the so-called -mark-to-market‖ accounting method. Enron lobbies in Washington and the SEC allows it to adopt such accounting practice 1990s: Enron hires the -best and brightest‖ traders, with extremely aggressive compensation packages. Skilling is promoted to COO in 1996. Andy Fastow, a former MBA from Kellogg hired in 1990, becomes CFO in 1998. Inspired by its former consultancy, Skilling installs the Performance Review Committee (PRC), a very tough evaluation system prompting strong internal rivalry November 1999: Enron starts trading exotic products such as weather derivatives. Release of Enron Online, a global energy transaction system by the Internet considered a new paradigm Corporate Governance The Enron's case
Factors Causing Enron’s Collapse: An Investigation Into Corporate Governance and Company Culture
Corporate Ownership and Control, 2011
This paper investigates and evaluates the weaknesses of Enron’s corporate governance structures, weaknesses that lead to the collapse of the company. Overall, poor corporate governance and a dishonest culture that nurtured serious conflicts of interests and unethical behaviour in Enron are identified as significant findings in this paper. Employing the case study method, the paper synthesizes, analyses, and interprets all aspects of corporate governance that lead to Enron’s collapse based on three main reports: The Powers Report (Powers, Troubh and Winokur 2002), the Testimony of Chief Investigation (Roach 2002), and The Subcommittee’s Report (United States Senate’s Permanent Subcommittee on Investigations 2002). Firstly, Enron’s Board of Directors failed to fulfil its fiduciary duties towards the corporation’s shareholders. Secondly, the top executives of Enron were greedy and acted in their own self-interest. Thirdly, many of Enron’s employees witnessed the wrongdoings of Enron’s ...
Enron Et Al.: Paradigmatic White Collar Crime Cases for the New Century
Critical Criminology, 2004
The Enron et al. cases (i.e., the series of ''corporate scandal'' cases emerging in 2001-2002, beginning with Enron, and including such cases as WorldCom, Global Crossing, Adelphia, and Tyco) are the first major American white collar crime cases of the new century. This article identifies some of the key attributes of these cases. The Enron et al. cases can only be understood by applying criminological theory on several different levels; structural, organizational, dramaturgic and individualistic dimensions are applied to the Enron case in particular. The Enron et al. cases must also be understood in the context of an emerging postmodern society. The specific role of criminologists in explaining and responding to these paradigmatic new white collar crime cases is addressed. The article ends with some conjectures on the potential outcomes of the Enron et al. cases. Enron as Metaphor The Enron et al. cases of 2001-2004 are the largest scale white collar crime cases since the S & L and insider trading cases of the 1980s. The Microsoft antitrust case of the late 1990s could also be classified as a major white collar crime case, although it was pursued by federal and state antitrust lawsuits that did not attempt to convict Microsoft executives of criminal charges (Auletta 2001; Heilemann 2001). In terms of overall impact on the economy, the political and legal environment, and public perceptions of business-related crime and ethical lapses, it was evident from quite early in 2002 on that the Enron case, in conjunction with related cases, was overshadowing many earlier cases of white collar crime, and at least potentially could have transformative effects. These cases involved an exceptionally broad range of leading corporate and financial executives and institutions. The term ''Enron et al.'' is invoked here to refer to the specific cases involving the Enron corporation and some of its top personnel, but also to the linked case of the Andersen accounting firm, and a series of cases
Maximizing Student Learning Through Enron: The Ultimate B-Law Case Study
Journal of Legal Studies Education, 2007
It has been described as ''the corporate scandal of the century.'' Books have been written about it, its full-length documentary film was nominated for an Academy Award, it appears as an ethical case study in nearly every college business law textbook written since 2002, and for five years running, it has captivated the press and fascinated the publicFthe Enron scandal. 1 In the introductory business law course, we typically hold up Enron as an example of how unethical business practices can lead to disaster. However, in giving the Enron case such limited treatment, are we maximizing our students' understanding of all that Enron represents? The Enron scandal is too rich a learning experience to be a mere case study on unethical accounting practices. Enron can be used as the central case study in an introductory business law course to exemplify the ways in which the Constitution, administrative agencies, government regulation, and criminal and civil liability, not to mention ethical decision making, have the potential to impact Big Business. This article suggests a teaching strategy to maximize student learning about the law and its relationship to business practices using the Enron scandal as ''The Ultimate B-Law Case Study.'' 2
Enron discourse: the rhetoric of a resilient capitalism
Critical Perspectives on Accounting, 2004
This paper analyzes two examples of micro-discourse that have emerged in the Enron saga: first, the Letter to Shareholders in Enron's Year 2000 Annual Report; and second, the testimony provided by the CEO of Andersen, Joseph Berardino, to the U.S. Congress in December 2001. The intent is to inform the grander (or mega) discourse relating to Enron and to corporate collapse, US-style. The micro-perspective reveals a rhetoric that is integral to sustaining the ideology of capitalism and to ensuring its resilience and long-term survival. We highlight the authors' reverence of "the market" and a win-at-all-costs form of capitalism; their reification of the business corporation; and their confounding view of the significance of accounting. The micro-discourse also suggests that several of the corporate leaders implicated in the collapse of Enron were deceitful, deceptive, egocentric, arrogant, hubristic and harbored delusional complexes.
SSRN Electronic Journal, 2002
com/employer/articles/article.asp?aid= 534&atype=scre (last visited 9/13/02) (reporting that "[t]wenty-nine top executives, including former CEO Jeffrey Skilling, ... sold off a billion dollars of their own stock before the company tanked"). 5 In re Enron Corp. Case No. 01-16034, Retention Bonus Payments (June 17, 2002), at http://news.corporate.findlaw.com/legalnews/documents/archive\_e.htm (last visited 10/2/02); Joshua Chaffin & Stephen Fidler, Enron Revealed To Be Rotten To The Core, Financial Times (London) (Apr. 9, 2002) at [6-7] (reporting on two retention funds, totaling $95 million, with some employees receiving millions of dollars for a 90-day commitment to the company). 6 Brad Foss, Associated Press, Several Insiders Say they're Owed Extra Pay by Enron, The San Diego Union-Tribune, Aug. 13, 2002, at C3 (reporting that some insiders "seek hundreds of thousands of dollars").