Enron Mini Case

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Chapter2 - GOVERNANCE FAILURE AT ENRON 1. Enron share price continued to rise dramatically throughout the 1990s but eventually, because of major accounting fraud and questionable ethics of business as well as the executives looting the firm, it resulted to bankruptcy of the firm. The Enron business failed most in internal forces because they are directly responsible in determining both the strategic direction and execution of the company. Enron's collapsed mainly due to massive incompetence of the management. It also affects the externally because of the deceit corporate governance culture practices, it also fails as an outcome. 2. We think each of the individual stakeholders and components of the corporate governance system are acted to resolve the problems before they reached crisis proportions, because the senior management made an options other than debt options for additional external capital by their first employed concept of Cactus Fund in 1991 to support business development and took the concept to a new level, created by Andrew Fastow of having partnership deals with SPE, that resulting to appreciation in the value of the SPE and contributed significant earnings to Enron throughout 1990 and 2000. The failure of Enron business destroyed the wealth of investors and also the career, income and savings of the stakeholders. The solution that they did was only temporary. The Special Purpose Entity created by Andy Fastow and his assistant Michael Kopper served to very important purposes, by selling troubled assets to the partnerships to fund new investment activities and sell of the troubled investments to the partnerships then use to make its quarterly earnings commitment to Wall Street. As Enron's share price plummeted in the early fall of 2001, the equity in the SPEs would no longer meet accounting guidelines for remaining off balance sheet. 3. People

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