The collapse of Enron case study
Q1. The key stakeholders involved in, or affected by the collapse of Enron are: employees and retirees, thousands of them lost their jobs and the investment; the executives: Kenneth Lay, Jeffrey Skilling and Andrew Fastow they sold significant blocs of company stock, have conflicts of interests; government figures, Lay had close personal tie with the Bush family, Enron’s efforts influence policy making; regulatory authorities: Commodities Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC); their business partners: Arthur Anderson and Vison & Elkins; the competitor Dynergy; the two banks: Citi Bank and J.P. Morgan Chase and the last two are the customers and investors. The stakeholders let the collapse of Enron through their carelessness and lack of oversight. Employees were afraid to question the company and their directors and business partners suffered form the same financial conflicts of interest. The government do not ensure the managers action are aligned with stakeholders interests, they have close and personal relationship between upper manager and Board of director and corporate governance agents and have high compensation for board member. The accounting methods used by management to manipulate Enron’s earnings. The reward system let employees to make the accounting numbers look good. The deregulation causes the market become more volatile and risk, customers and producers are complaint. Regulators enforcement did not enough, Enron’s financial statements look like a black box. The business partners encourage Enron do some questionable activities. Because of the collapse, the two banks faced major write-downs on bad loans and before the collapse the management still lying to employees to who have invested in Enron’s stocks.
Q2. The corporate strategy in Enron encourages the company use illegal and questionable ways to increase value. Enron’s compensation and award system and the “rank...
Please join StudyMode to read the full document