Enron The Poor Corporate Governance System - 2025 Words

Enron was once a very large and powerful company that was admirable to many but now it is the focus of many examples on what not to do in business. The poor corporate governance system in place at Enron not only caused the company to fail but it also ruined many people’s lives. People had the idea I their head that Enron was too big to fail but that kind of assumption should never be made about a company. Enron is an example of a company that appears to be following all the rules from the outside but a deeper look reveals all that they had been doing wrong. The start of Enron was the start of what could be a very promising business but perhaps their methods back in the beginning are what made them in to what they became. Enron formed with†¦show more content†¦This success that he was seeing could have been what lead him to go over the top he thought that his current success would lead to future success and this drove him to continue to come up with as many new and creative ways for the company to do things that would bring them a bigger and bigger profit. Enron tried to follow many of the rules that are out there to prevent this type of down fall but in the end these rules still didn’t end up helping the company. One way a company can help make sure that the executives have the best of the company in mind is to pay them with stock in the company. The goal of this is to make sure that the executives interests align with the interests of the company and its shareholders. Enron tried this method but it didn’t pan out as they expected. Using this method could have caused the executives to be â€Å"not asking the tough questions.† (Lavelle, 2001). Having an independent audit committee is also another way to make sure that the company stays strong and doesn’t break any rules. An audit committee is responsible for the company’s external audit and to prevents managements manipulation of the audit (Larcker Tayan, 2016). This is something that it appeared that Enron was doing well from the outside but in reality the audit committee was letting just about anything pass them by. To fit the NYSE (NewShow MoreRelatedPorsche Changes Tack1008 Words   |  5 Pages MINI-CASE 2 Governance Failure at Enron If all publicly traded firms are operating within the same basic corporate governance system as Enron., why would some people believe this was an isolated incident, and not an example of many failures to come? 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