A Summary On Corporate Governance

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Like de Kluyver argued in his publish (A primer on Corporate Governance, 2009), “there is a presumption that, in making a business decision, the directors acted on an informed basis, in good faith, and in the honest belief that the action was taken in the best interest of the corporation.” However, even though the bar has been set, the definition of “best interest of the corporation” is open for every business directors to interpret. In the case of Enron, the rule had been bent so hard that it finally broke. The company was originally established as an energy provider in the US. In 1970s, the CEO of Enron seized the chance of US energy market deregulation and navigated the company into a new and attractive business – energy trading.…show more content…
Because of the massive company structure, when the bubble broke in 2001, a numerous amount of people took the hit. The stockholders of Enron scandal include company employees, board of directors, Arthur Anderson accounting firm, Vinson & Elkins law firm, and the general public of the society. There were specific internal control protocols and external audit agreements designed to prevent the tragic from happening. However, just like my classmate Likhita said during the class discussion (Thought and Discourse, September 16, 2015), “People will always find the loophole”. In terms of internal control failing, first of all, the malfunction of the board of directors would be our primary concern. Enron Board of Directors clearly failed to oversight company operations. In United States Senate Subcommittee report (The role of the board of the directors in Enron’s collapse, Permanent subcommittee on investigations, 2002), committee memebrs indicated that “The Board witnessed numerous indications of questionable practices by Enron management over several years, but chose to ignore them to the detriment of Enron shareholders, employees and business associates.” Moreover, the Board of Directors directly violated Enron’s code of ethics and agreed the company from trading with several SPE (includes LJM1) run by its own CFO, Andrew Fastow. Such transactions were not designed to generate legit business profit, nor providing
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