“Describe How Enron Could Have Been Structured Differently to Avoid Such Activities”
“Describe how Enron could have been structured differently to avoid such activities”
Enron consisted of a Board of Directors, Chief Executive Officer (CEO), Chief Operating Officer (COO), Chief Financial Officer (CFO), Chief Accounting Officer (CAO) and a plethora of other officers. The upper level structure of Enron was normal compared to many other large businesses. The Board of Directors is charged with making policies for the company and the CEO and other officers are responsible for carrying them out. In Enron’s case, the CEO, Kenneth Lay, was said to be a “hands off” executive and allowed the CFO, Andrew Fastow, to manage activities such as “partnerships” and shell companies that would ultimately be the downfall of Enron. The basic structure of Enron’s upper level structure in itself is not a bad design if each layer of management is responsible to ensure proper adherence to company policies. In this case, the CEO did not fulfill his obligations in managing as described by the Board of Directors. Another part of the system that failed with regards to structure was Enron’s relationship to its accounting company, Arthur Anderson. They basically did a very poor accounting job at the behest of Enron executives (as some speculated) in an attempt to cover up billions of dollars in losses. Also, the $25 million dollars per year that Enron paid Arthur Anderson leads one to believe that they would do what was necessary to keep an account that large. (http://www.time.com/time/magazine/article/0,9171,1001636,00.html) Arthur Anderson had previous employees at executive levels within Enron which is not in itself illegal, but one has to wonder how the influence was applied. Another huge apparent disconnect was how the company was structured where accounting functions were kept separate from the CFO’s position. (http://fl1.findlaw.com/news.findlaw.com/hdocs/docs/enron/enronbk72803app-c.pdf)
“Discuss whether Enron’s officers acted within the scope of
Enron consisted of a Board of Directors, Chief Executive Officer (CEO), Chief Operating Officer (COO), Chief Financial Officer (CFO), Chief Accounting Officer (CAO) and a plethora of other officers. The upper level structure of Enron was normal compared to many other large businesses. The Board of Directors is charged with making policies for the company and the CEO and other officers are responsible for carrying them out. In Enron’s case, the CEO, Kenneth Lay, was said to be a “hands off” executive and allowed the CFO, Andrew Fastow, to manage activities such as “partnerships” and shell companies that would ultimately be the downfall of Enron. The basic structure of Enron’s upper level structure in itself is not a bad design if each layer of management is responsible to ensure proper adherence to company policies. In this case, the CEO did not fulfill his obligations in managing as described by the Board of Directors. Another part of the system that failed with regards to structure was Enron’s relationship to its accounting company, Arthur Anderson. They basically did a very poor accounting job at the behest of Enron executives (as some speculated) in an attempt to cover up billions of dollars in losses. Also, the $25 million dollars per year that Enron paid Arthur Anderson leads one to believe that they would do what was necessary to keep an account that large. (http://www.time.com/time/magazine/article/0,9171,1001636,00.html) Arthur Anderson had previous employees at executive levels within Enron which is not in itself illegal, but one has to wonder how the influence was applied. Another huge apparent disconnect was how the company was structured where accounting functions were kept separate from the CFO’s position. (http://fl1.findlaw.com/news.findlaw.com/hdocs/docs/enron/enronbk72803app-c.pdf)
“Discuss whether Enron’s officers acted within the scope of