Enron Case Study

Enron

1. How did the corporate culture of Enron contribute to its bankruptcy?

There was an overwhelming aura of pride, carrying with it the deep-seated belief that EnronÐŽ¦s people could handle increasing risk without danger. The culture also was about a focus on how much money could be made for executives. For, example EnronÐŽ¦s compensation plans seemed less concerned with generating profits for shareholders than with enriching officer wealth. EnronÐŽ¦s corporate culture reportedly encouraged flouting, if not breaking, the rules.

2. Did EnronÐŽ¦s bankers, auditors, and attorneys contribute to EnronÐŽ¦s demise? If so, what was their contribution?

„X EnronÐŽ¦s auditor, Arthur Andersen was responsible for ensuring the accuracy of EnronÐŽ¦s financial statements and internal bookkeeping. AndersonÐŽ¦s reports were used by potential investors to judge EnronÐŽ¦s financial soundness and future potential before they decided whether to invest and by current investors to decide if their funds should remains invested there.

„X Former CEO Jeffrey Skilling, widely seen as EnronÐŽ¦s mastermind. He was so sure he had committed no crime that he waived his right to self-incrimination and testified before Congress that ÐŽ§I was not aware of any inappropriate financial arrangement.ЎЁ Jeffrey McMahon told a congressional subcommittee that he had informed Skilling about the companyÐŽ¦s off-the-balance-sheet partnership in March 2000, when he was EnronÐŽ¦s Treasurer.

3.Whatrole did the chief financial officer play in creating the problems that led to EnronÐŽ¦s financial problems?

Chief Financial Officer Andrew Fastow was indicted in October 2002 by the U.S. justice Department on seventy-eight federal counts for his alleged efforts to inflate EnronÐŽ¦s profits. The charges included frauds, money laundering, conspiracy, and one count of obstruction of justice. Fastow faces up to 140 years in jail and millions of dollars in fines if convicted on all counts.

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