Enron Scandal Case
The Enron Scandal
Question 1. Which segment of its operations got Enron into difficulties?
Kopper and Dodson creating a series of limited partnerships and limited companies which were to operate in their interests is the segment of its operations that got Enron into difficulties. Kopper did not have an outside investor at risk, but Dodson did.
Question 3. Did Enron’s directors understand how profits were being made in this segment? Why or why not?
I do not think Enron’s directors understood how profits were being made. The information provided was unreliable and Enron’s company policies were not being followed. I think Enron’s directors were led to believe the company was being handled with integrity, however; in reality management was in chaos.
Question 5. Ken Lay was the chair of the board and the CEO for much of the time. How did this probably contribute to the lack of proper governance?
The CEO should have knowledge of what is going on with his business at all times. They should get a report of the company’s revenue daily, and Ken Lay should have noticed that the revenue was overstated. This oversight by the Ken Lay allowed the inappropriateness to continue.
Question 6. What aspects of the Enron governance system failed to work properly, and why?
The aspect of the Enron governance system that failed to work properly was the accounting firm. Their primary function was to assure that the company was accurately and completely disclosing its financial results and condition. Obviously, the accounting firm was not acting with integrity or in the interest of the public.
Question 9. Identify conflicts of interests in: