ENRONS MORAL DIMENSIONS

1
ENRONS MORAL DIMENSIONS
Risk Management Strategy
Auditors Relationship
Executive Compensation And Governance Structures
Creation of Markets SPEs Stock as Collateral
Consulting and Auditing
Stock Options Managerial Oversight
2
SPE TRANSACTION
Outside Investor (at least 3)
non-independent investor
SPE
Enron (or subsidiary)
asset sold
secured w/ Enron stock
Additional Capital (at most 97)
3

• CONFLICT OF INTEREST
• "A conflict of interest exists when an individual
  must choose whether to
• advance his or her own interests, those of the
  organization, or those of some
• other group.  To avoid conflicts of interest,
  employees must be able to separate
• their private interests from their business
  dealings."
• Ferrell, O.C., Fraedrich, John and Ferrell,
  Linda. (2002). Business Ethics
• Ethical Decision Making and Cases. Boston
  Houghton Mifflin Co., p. 30
• Person P is involved in a conflict of interest
  when  
• P has responsibility to protect and advance the
  interests of some other
• individual or group (P is an agent or a
  fiduciary)
• AND
• 2. P has an interest in violating this
  responsibility because it results in

4
EXAMPLES

• Commission Structures for Financial
  Planners/Advisors
• Investment Banking and Stock Analysis
• Auditing and Consulting Services
• 4. Executive Stock Options
• OPTION 100,000 shares _at_ 10/share 1,000,000
• MARKET 100,000 shares _at_ 20/share 2,000,000
• GAIN 1,000,000
• 5. Bribes/Kickbacks (see Insurance Brokerage
  articles)