I. ETHICS CASE: ENRON’S QUESTIONABLE TRANSACTIONS
1. Which segment of its operations got Enron into difficulties?
There were several sections of Enron’s operations that began its troubles. Chewco Investments LP transactions started the difficulties for Enron. Kopper was appointed to manage Chewco but at the same time Kopper was an employee of Enron for Fastow. This created a conflict of interest and one that was known by a member of the board of directors. Monies of over $11 million were earmarked for certificates with the expectation of revenue generation but were not invested in the intended manner. Stocks were paid in promissory notes instead of cash. Revenue was erroneously reported for services that had not been rendered.
3. Did Enron’s directors understand how profits were being made in this segment? Why or why not.
Personally, I think that the majority of Enron’s directors were kept in the dark of how profits were truly made. An example of my reasoning is that only Jeffrey K. Skilling, who was on the board of director’s, was privy to the fact the Kopper worked at Enron for Fastow when he was appointed to manage Chewco. It should have been Skilling’s responsibility to point that fact out to the other board members. Personal gain was really at backbone.
5. 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?
Board members trusted Ken Lay and specified they had high respect for him and his level of integrity (Brooks, 2007). Therein lays the lack of governance issues. The board trusted him so much that they were blinded to all of the unethical things that would ultimately cause the demise of Enron. Lay, even though he may not have had full disclosure of everything that was going on, was as much to blame for the difficulties of Enron as many of the others involved in unethical behavior. There were no controls in place that may have sent up red flags...