enron questions

enron questions - such as Arthur Anderson or the banks. But...

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I definitely believe that monitoring was a huge issue of Corporate Governance that led to Enron's collapse. Many people wanted to see the financial statements of Enron; however, they would never produce them and would say that it was too difficult. That alone would raise suspicions in my eyes. Many of the banks that Enron dealt with should have required the financial statements before approving loans, but I guess they didn't care because they wanted to have such a prestigious business such as Enron as a client. I don't know if it apart of "Corporate Governance" or not, but the mark-to-market accounting method that Enron used, which was approved by the SEC definitely led to the collapse by creating a vicious cycle of lies. I agree that there were a numerous people that acted with unethical behavior. I was surprised that I didn't hear anything about Enron paying anyone straight-up as a payoff,
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Unformatted text preview: such as Arthur Anderson or the banks. But then again the auditors and the bankers did act unethically and did not need to be paid off. I did not know that Enron was part of the black outs in California, which was extremely profitable for them. I agree that the board of directors did not fulfill their fiduciary duties to shareholders. Towards the time when Enron was increasing its stock at extreme rates, they were making tons of money themselves and of course became greedy. But I wonder why they didn't take any action in the beginning. I don't think that the board gave the correct executive incentives. If they wanted to pay give out bonuses, they should have put caps on it. Since there wasn't a cap the top managers found loop holes to get more money for the company, which lead to infinitely higher bonuses....
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This note was uploaded on 06/07/2011 for the course ECON 101 taught by Professor Baker during the Spring '11 term at CUNY York.

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