Enron, Board Governance and Moral Failings
Enron, board governance and moral failings
Gerald Zandstra
Gerald Zandstra is Director of Programs at the Acton Institute for the Study of Religion and Liberty, Michigan, USA.
Keywords Directors, Ethics, Responsibility, Corporate governance Abstract The failure of the Enron Corporation has brought attention to the roles played by the chief executive officer and other executives of the modern corporation. Its failure has also produced discussion of further regulations that will, it is hoped, prevent another collapse similar to that of Enron. This article argues that the central reason for Enron’s crash was not a lack of regulations or the deceptions of executives but rather a failure of the board of directors of Enron to function in a morally and ethically responsible manner.
Introduction he stock of publicly held companies rises and falls on the leadership of its executives and its board of directors. President Bush recently developed a plan to address key issues involved in corporate responsibility. His plan, however, fails to take into account one of the most important weaknesses in the corporate governance: the board of directors. Ultimately the public and especially the shareholders have to trust that the board charged with company oversight will act in the best interest of the company. The board is the recipient of the public and shareholder trust and, in addition to portraying confidence to investors, it is responsible to see that wise decisions are made and that the law is being followed. What role did the board of directors play in the collapse of Enron and how will President Bush’s solutions address the situation?
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focused on information. It insists that investors have quarterly access to information that will allow them to gain a firm sense of the corporation’s financial situation as well as immediate access to critical information. The second broad principle pertains to chief executive officers (CEOs) and other executives and their
Gerald Zandstra
Gerald Zandstra is Director of Programs at the Acton Institute for the Study of Religion and Liberty, Michigan, USA.
Keywords Directors, Ethics, Responsibility, Corporate governance Abstract The failure of the Enron Corporation has brought attention to the roles played by the chief executive officer and other executives of the modern corporation. Its failure has also produced discussion of further regulations that will, it is hoped, prevent another collapse similar to that of Enron. This article argues that the central reason for Enron’s crash was not a lack of regulations or the deceptions of executives but rather a failure of the board of directors of Enron to function in a morally and ethically responsible manner.
Introduction he stock of publicly held companies rises and falls on the leadership of its executives and its board of directors. President Bush recently developed a plan to address key issues involved in corporate responsibility. His plan, however, fails to take into account one of the most important weaknesses in the corporate governance: the board of directors. Ultimately the public and especially the shareholders have to trust that the board charged with company oversight will act in the best interest of the company. The board is the recipient of the public and shareholder trust and, in addition to portraying confidence to investors, it is responsible to see that wise decisions are made and that the law is being followed. What role did the board of directors play in the collapse of Enron and how will President Bush’s solutions address the situation?
T
focused on information. It insists that investors have quarterly access to information that will allow them to gain a firm sense of the corporation’s financial situation as well as immediate access to critical information. The second broad principle pertains to chief executive officers (CEOs) and other executives and their
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