Enron Corporation, Essay Example

Describe how Enron could have been structured differently to avoid such activities?

Corporate governance is an approach that ensures that the organization functions according to its mandate. According to OECD (1999), corporate governance “is a set of relationships between a company’s board, its shareholders and other stakeholders. It also provides the structure through which the objectives of the company are set, and the means of attaining those objectives, and monitoring performance, are determined”. The problems encounter by Enron could have been easily avoided if the organization has properly implemented the guidelines of corporate governance and instead of focusing just increasing the shareholder’s value the organization has implemented the stakeholder’s model (Nistor, Stilpon, & Thompson, 2000).

Discuss whether Enron’s officers acted within the scope of their authority?

The fact is most of the top officials at Enron including Jeff Skilling, the CEO of Enron, Ken Lay the Chairman of Enron, and Andrew Fastow, the CFO of Enron, along with the top officials of the external audit firm Anderson violated their terms of employment and instead of working for the best interest of Enron, they worked to ensure their own personal gains and benefits and hide the true position of the organization to get different incentives along with stock market gains. In addition other board members of the organization are also equally responsible for the collapse of the organization because they have not question how the organization is functioning, particularly the financial figures depicted in the financial statement of the organization (Gompers, Ishii, & Metrick, 2001).

Describe the corporate culture at Enron?

The corporate culture of Enron has been built on aggressive approach and risky innovation. Perhaps this was the reason that the organization that has been originally formed as a gas-pipeline distribution company has emerged into diversified company. The organization at the time of bankruptcy was involved in businesses including natural gas, communication, electricity, pulp, and paper. The organization has been named as the most innovative organization by Fortune for six consecutive years. Although the organization get the “most innovative” company title, but this milestone was accomplish at the cost of the shareholders and other stakeholders of the organization, because the organization was taking extra, and most of the risky business resulted in huge collapse that ultimately lead towards the bankruptcy of the organization (Denis & MConnell, 2003).

Discuss two alleged irregularities in the actions between sellers of securities and Enron?

The two alleged irregularities at Enron was that Enron’s board allowed the CFO of the company to head-off-the-books partnership that carried more than 1 billion USD debts. The second alleged irregularity was that executives predicted higher stock prices as they were selling off their own investments, thus transferring their own personal risks towards the general public.

Discuss whether or not Enron was liable for the actions of its agents and employees?

A corporate business is an artificial legal entity having common seal that is represented by elected board who are responsible for the management of the organization who recruited different functional specialists to carry out the tasks of organization (Dravid, 2005). In turn the various steps taken by the member of organization (director, manager, or employee) who are the agent of the organization are binding for the principal, and the organization is responsible for all the acts undertaken in the capacity of the agent of the organization (Davletguildeev, 2003). As the CEO, Chairman, CFO and other top company officials have taken different steps as an agent of Enron, all their acts will are considered as the act of their principal, the Enron and it was binding on the corporation to fulfill their obligations in this regard.

References

Davletguildeev, R. (2003). The Role of Employees as Stakeholders in Corporate Governance. Trade Unions Advisory Committee to the OECD Third Euasian Rountable on Corporate Governance .

Denis, D., & MConnell, J. (2003). International Corporate Governance. Journal of Financial and Quality Analysis 38 (1) , 1-38.

Dravid, F. R. (2005). Strategic Management. USA: Pearson.

Gompers, P., Ishii, J., & Metrick, A. (2001). Corporate Goverrnance and Equity Prices. NBER Working Paper , 111-32.

Nistor, Stilpon, & Thompson, J. (2000). Corporate Governance Patterns in OECD Economies: Is Convergance Underway? In Nestor, & S. T. Yasuri, Corporate Governance in Asia: A Comparative Perspective (pp. 19-43). France: Organization for Economic Cooperation and Development.

OECD. (1999). Corporate Governance.