Enron Case Study

ENRON CASE                                                        Name:

        Please read the Enron cases posted on blackboard and the one in your book then answer the following questions based upon the case and Chapter 9. Make sure that your answers are supported by the facts of the case and the concepts you learned from Chapter 5. Please rely only on the case/chapter 9 to answer the questions except for question # 12—requires outside search.

        Make sure your answers are sufficiently brief, concise, and relevant to the question. Please avoid general, round, and long statements based upon speculations. “Briefly explain” means an explanation requiring 2-5 sentence elaboration of the topic in hand.

        This is an independent and individual project that should be done by each individual student alone. Any extensive similarities and consistent patterns among students will result in a grade of zero for any student involved in the situation. If you need assistance I should be the source to answer any questions and respond to any concerns regarding the case.

        It is also not acceptable that the student plagiarizes through internet sources, written documents and reports of others, and etc. Any outside source should be correctly cited with a reference.

Each case will be electronically submitted on blackboard Late papers will not be accepted under any circumstances.

1.        List 5 key stakeholders affected by the collapse of Enron? Explain briefly how each stakeholder was affected.

        a.

        b.

        c.

        d.

        e.

2.        Looking at all the evidence, what do you believe were the 3 major internal causes of Enron’s collapse? Explain each briefly.

        a.

        b.

        c.

        What do you believe were the 2 main external causes of Enron’s collapse? Explain each briefly.

        a.

        b.

3.        Insider trading occurs when a person uses confidential (“inside”) information about a company to buy or sell the company’s stock for a gain. What evidence can you find in the case of insider trading?

4.        a. Enron’s accountants, Arthur Andersen, acted unethically. List and briefly explain Arthur Anderson’s unethical act(s)?

        b. Briefly explain why you think Arthur Anderson acted unethically?

5.        How would you describe Enron’s corporate culture? Please write down 3 characteristics and explain each characteristic briefly:

        a.

        b.

        c.

        How did the cultural characteristics above lead to Enron’s collapse?         Explain briefly.

        a.

        b.

        c.

6.        a. How were employees compensated / rewarded at Enron?

        b. How were top executives compensated / rewarded at Enron?

        c. How do you think employee compensation/reward system at Enron contributed to fraudulent acts and conducts at Enron?

        d. How do you think executive compensation/reward system at Enron contributed to fraudulent acts and conducts of    Enron executives?

7.        In what ways might the behavior of various top executives at Enron (e.g., Kenneth Lay, Jeffrey Skilling, and Andrew Fastow) foster a disregard for ethical standards in the actions of other Enron employees? 2 ways

        a.

        b.

8. What are major responsibilities of an organization’s board? 3 responsibilities, explain each briefly

        a.

        b.

        c.

        Do you think Enron’s board did a good job fulfilling its responsibilities? If yes how, if no, explain how and why they failed ?