Corporate Governance

Topics: Enron, Enron scandal, Corporate governance Pages: 20 (4970 words) Published: April 20, 2014


Corporate Governance Issue
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Corporate Governance Issue
Introduction
The Purpose of the Case study is to assess the case of Enron mainly at the Corporate Governance problems. This Report will point out that why Independence of the Company’s Director is vital to clear operation of the organization; why successful Boards are compulsory for the companies to avoid the disasters like the Enron; and there must be the Working committee including the Non-Executive directors. Discussion

The Enron Corporation was the American Commodities, energy & the company services based in the Texas. Before the Bankruptcy on 2nd December, year 2001, Enron has employed around 20 Thousand staff & was one of World's main Natural gas, Electricity, Communications & the pulp & paper companies by claimed Turnover of around $ 100 Billion in the year 2000. Enron had used the deceptive & false methods to resourcefully hide their dealings that causes to the investors losses & the trust of creditors. The Losses were also held off book by the subsidiary entities while the Assets were commenced. The Publicly listed entities are needed to make their financial statements on the public but the finances of Enron’s were an impassable maze of cautiously crafted fantasy Transactions among themselves and their Subsidiaries (Peng, 2002). The Insider Trading will happen when the person will use Confidential that is the Insider Information regarding the Company to purchase or sell entities share for the Gain. What Proof might we find in case of the Insider Trading? The Past Head of the Enron and the New Enron Executives were manipulating entities Finance & sold the company shares at the inflated price and had got around $4.25 Million in the Income from 2000 till 2001. Enron has also filed for the protection of Bankruptcy in Southern region of New York at the late 2000 & had chosen Gotshal, Weil and Manges as the Bankruptcy was direction. This finished its Bankruptcy at the time of November 2004, pursuant with the approval of Court plan of Reunion, after one of most complicated cases of Bankruptcy in the US (Peng, 2002). The combination of the problems had later result in Bankruptcy of entity and several of them was perpetuate by Indirect information or Direct actions of the Jeffrey, Lay, Andrew & the other Executives. Lay has served as Chairman of Enron in their past few years and the approval by the Skilling actions & Fastow yet he did not forever request regarding the Details. The founder of Enron had convicted over the ten conspiracy counts, fraud of securities, fraud of wire, Bank Fraud & also for creating false statements to the Banks. He was then also sentence for around Thirty years. He then died in the 2005 due to the Heart attack at Rental house in Colo. The Staff of Enron had higher than Sixty percent of the Retirement savings Invested in their Enron equity, as per the Washington based lawyer reflecting the Enron Group employees that have filed the Class action court case against Enron (Vicki, 2007). They does the not forecast their finances & operations with the analysts & shareholders. The Organization has also used the Accounting limits to misrepresent the income & then alter the Balance sheet to depict the positive description of their performance. The mixture of the Actions problems later causes to Bankruptcy of company and everyone was concerned with perpetuate by indirect knowledge or the Direct actions and the other Executives. The bankruptcy of Enron, known by all, is unfortunately not an isolated event. There are cases of previous scandals like Sunbeam, Waste Management or Global Crossing. In addition, some companies that no one would have suspected something, like General Electric, Tyco, Cendant and AOL Time Warner, are being monitored for their questionable accounting practices (Vicki, 2007). What happened at Enron? Overall, it was a system dominated by managers, indolent, with little...


References: Bryce, R. (2002) Pipe Dreams: Greed, Ego, and the death of Enron. Oxford: Public Affairs.
Healy, Paul M
Alex G. (2005). Enron: The smartest guys in the room. Documentary, Magnolia Pictures.
Yunxuan & Peng Z. (2002). The Analysis on Affecting a Radical Cure Accounting Fraud by the Corporations Which Have Come into the Market from Enron Company Bankruptcy. Economy & Audit study, 17(4):32-35.
Larry Rittenberg, Mark A. (2001). Internalization versus externalization of the internal audit function: an examination of professional and organizational imperatives. Accounting, Organizations and Society, 26: 617-641.
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Matthias K, (2009), Creative Accounting, the Enron Case and Its Impact on Corporate Governance, Published by GRIN Verlag
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