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Enron Case Study

1. In a narrative format, discuss the key facts and critical issues presented in the case.

2. Enron resulted in significant legislation to prevent future ethical misconduct. Do you think that Sarbanes Oxley has been effective in managing the risks exposed through Enron, Arthur Anderson, Worldcom, etc.?‚Äč

3. Do you believe we will see a new wave of legislation to prevent ethical misconduct as a result of our current global financial crisis? If so, do you think it can effectively manage these risks?

4. If you had been Ken Lay, how would you have established a system to assist you in managing the ethical culture of the organization (considering you employed 30,000 in 30 countries) and prevent the misconduct that occurred?

*150 words per question
Students should identify one or two outside sources relevant to each case and incorporate information from those sources into the posts.


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Step 1
The key facts of the case are that Enron which was ranked among the Fortune 500 companies collapsed in 2001 under a mountain of debt that had been concealed through off-balance sheet partnerships and investor loss of confidence. The company ultimately went bankrupt, laid off five thousand employees, and thousands lost their retirement savings that had been invested in Enron stock. The investors lost tens of billions of dollars after the stock price dropped. Enron Corporation was created out of merger two major gas pipeline companies in 1985. The company had an aggressive employee culture that increased the financial wealth of the company at "any cost". The company had been using special purpose entities to hide debts from balance-sheet. The whistle-blew on Enron when a veteran was given the task of selling off some of the company's assets to raise funds. In 2002 the CFO was indicted of inflating profits. The top management of Enron was inducted of fraud. Arthur Andersen the auditor of Enron was also found guilty of wrong reporting and destruction of evidence.

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Solution Summary

This solution explains Enron Case study. The sources used are also included in the solution.