Ethics Week 2 Enron and World Com

Topics: Board of directors, Enron, Fiduciary Pages: 3 (825 words) Published: April 27, 2012
The Enron and World Com Scandals

1.The board directors failed their fiduciary obligation to protect their shareholders, employees, and business partners by allowing high risk accounting, inappropriate conflict of interest, expenses undisclosed off the books activity, excessive compensation, and lack of independence between the company, and board members. I feel the segment that got Enron into trouble was the Executive and finance committee (Brooks). 3.I do believe that they did understand how profits were being made, as the finance committee was part of approving the transactions, overseeing the risk management efforts, and provided guidance. The executive committee was involved and making some these decisions. I do not know how they could not be aware of how profits were being made, but there were a lot of misperceptions, shifting money and investing in make shift companies as well as underhanded reporting and financial statements. I think that Mr. Fastow, the Arthur Anderson auditors, and CEO had a role in misleading the directors. In the book it states that it was questioned why Mr. Causey the Chief Accounting Officer never came forward with concerns (Brooks, 2007). 5.Ken Lay did not uphold his duty as a chair and CEO of Enron. He may have been misguided by Fastow, but I find it hard to believe that he knew nothing of the various schemes of buying and selling into companies that were basically owned by Enron without money invested to do this. He attended and met with the finance committee, as well as the compensation committee and knew where his money was coming form. At the least, he should have seen the red flags or done something when Baxter and Watkins complained of wrong doing. He chose to ignore, and still be compensated knowing things were not right. He did not follow any code of conduct, and allowed others to bend the rules and chose to ignore what was going on (Brooks, 2007). 6.The governance failed on many levels. The board...
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