The Causes Of Enron 's Bankruptcy Essay examples
The lack of truthfulness by management about the health of the company, according to Kirk Hanson, theexecutive director of the Markkula Center for Applied Ethics. The senior executives believed Enron had to be thebest at everything it did and that they had to protect their reputations and their compensation as the mostsuccessful executives in the U.S.
The duty that is owed is one of good faith and full disclosure. There is no evidence that when Enron’s CEO toldthe employees that the stock would probably rise that he also disclosed that he was selling stock.
Moreover, theemployees would not have learned of the stock sale within days or weeks, as is ordinarily the case. Only the investigation surrounding Enron’s bankruptcy enabled shareholders to learn of the CEO stock sell-off before February 14, 2002 which is when the sell-off would otherwise have been disclosed.
Why the delay? The stockwas sold to the company to repay money that the CEO owed Enron—and the sale of company stock qualifies as an exception under the ordinary director and officer disclosure requirement. It does not have to be reported until45 days after the end of the company’s fiscal year. (The Conference Board, Inc., 845)
It has been suggested that conflicts of interest and a lack of independent oversight of management by Enron 's board contributed to the firm 's collapse. Moreover, some have suggested that Enron 's compensation policies engendered a…