The paper "Governance and Ethical Business Practice: Enron’ s Collapse" is a perfect example of a case study on business. Successful corporations globally are associated with good corporate governance. Corporate managers are therefore called upon to comply with regulatory standards while avoiding principle-agent conflicts of interest in order for them to enhance the firm’ s goodwill. Enron Corporation was initiated in 1986 whereby natural gas pipeline companies merged to become one corporate entity (Chaffin & Fidler, 2002). Like any other corporate firm, Enron diversified its products and services and became one of the most successful companies in the US.
However, due to poor and unethical top management practices resulted in the collapse of the company in December 2001. Enron Corporation was one of the World’ s largest companies prior to its Collapse. The poor accounting practices and misleading financial statements deprived the company of its financiers, the share market, and potential investors. The collapse of Enron raised both political and financial questions resulting in an examination of corporate regulations in the US and the world over. In American capitalism history, Enron's failure was devastating causing a major impact on the financial market by driving away both local and foreign investors.
Prior to its collapse, Enron was positioned as the most innovative company in the United States; it was claimed that the company exemplified the transition away from production to the knowledge economy. Owing to this many investors were attracted to invest with Enron. There are many lessons that can be learned from the collapse of Enron (Chaffin & Fidler, 2002). This paper seeks to present a critical analysis of the factors that contributed to the rise and collapse of Enron, the underlying roles of different stakeholders, and the moral and ethical issues that were not observed.
The paper will be summarized by giving lessons that can be learned in order to prevent another major corporate collapse.
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