Enron

Which segment of its operations got Enron into difficulties' They didn't have a governance system as we know them today They spent more time trying to find loopholes in tax law rather than how to make legitimate operations profitable 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' With the lack of proper governance was the down fall of the company. Any CEO should know what is going on with the operations of the company. Failure to know what is going on in the company can affect the operation of the company. The CEO should have noticed that the revenue was overstated. What aspects of the Enron governance system failed to work properly, and why' The aspect of the Enron governance system that failed is basically appears to be all of it. Nothing was done until they were put on the spots. Then at that point they started questioning what went wrong. Identify conflicts of interests in: • SPE activities • Arthur Andersen’s activities • Executive activities As the price of Enron stock declined, some Enron executives exercised their stock options and sold their shares, in some cases out of public view through loan repayment plans, while at the same time encouraging employees to hold and even to buy the stock. Many employees who tried to sell the stock in their 401(k) plans were barred from doing so and lost not only their jobs but most or all of the asset value of their retirement plans. The Board of Directors at its' meeting on October 12, 1999 waived Enron's code of ethics to permit Mr. Fastow to serve as a general partner of LJM2 and establish guidelines for Enron's transactions of business with LJM2. Those included: (i) no obligation to do transactions between Enron and LJM2; (ii) the Chief Accounting and Risk Officers would review, and where appropriate, approve transactions with LJM2; (iii) there would be an annual review by the Board's Audit Committee of completed transactions or recommendations as appropriate; and (iv) there would be an annual review as to the application of the Company's code of ethics to assure that such transactions would not adversely affect the best interests of the Company. The report by Sen. Carl Levin, D- Mich., Chairman of the Permanent Subcommittee on Investigations (PSI), examines in detail the role of the Enron Board in the company's bankruptcy and concludes that the Board saw but ignored numerous questionable practices by Enron management to the detriment of Enron shareholders, employees and business associates and contributed to the company's downfall.