1. What led to the eventual collapse of Enron under Lay and Skilling?
The collapse of Enron seems to be rooted in a combination of the failure of top leadership, a corporate culture that supported unethical behavior, and the complicity of the investment banking community. In the aftermath of Enron’s bankruptcy filing, numerous Enron executives were charged with criminal acts, including fraud, money laundering, and insider trading. Ben Glisan, Enron’s former treasurer, was charged with two-dozen counts of money laundering, fraud, and conspiracy. During the plea negotiations, Glisan described Enron as a “house of cards.” Andrew Fastow, Jeff Skilling, and Ken Lay are among the most notable top-level executives implicated in the collapse of Enron’s “house of cards.” Andrew Fastow, former Enron chief financial officer (CFO), faced 98 counts of money laundering, fraud, and conspiracy in connection with the improper partnerships he ran, which included a Brazilian power plant project and a Nigerian power plant project that was aided by Merrill Lynch, an investment banking firm.
2. How did the top leadership at Enron undermine the foundation values of the Enron Code of Ethics?
Enron’s ethics code was based on respect, integrity, communication, and excellence. Kenneth Lay, former chairman and (CEO) of Enron Corp., once quoted as saying: “I was fully exposed to not only legal behavior but moral and ethical behavior and what that means from the standpoint of leading organizations and people.” In an introductory statement to the revised Enron Code of Ethics issued in July 2000, Lay wrote: “As officers and employees of Enron Corp., its subsidiaries, and its affiliated companies, we are responsible for conducting the business affairs of the companies in accordance with all applicable laws and in a moral and honest manner.” Lay went on to indicate that the 64-page Enron Code of Ethics reflected policies approved by the company’s board of directors and that the...
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