Learning from Enron
Cambridge Centre for Business Research Working Paper No. 274
17 Pages Posted: 20 Sep 2011
Date Written: September 1, 2003
This essay argues that the Enron affair has been misunderstood as a failure of monitoring, with adverse consequences for the drafting of the Sarbanes-Oxley Act and the Higgs report. Where Enron’s board failed was in underestimating the risks that were inherent in the company’s business plan and failing to implement an effective system of internal control. Enron demonstrates the limits of the monitoring board and points the way to a stewardship model in which the board takes responsibility for ensuring the sustainability of the company’s assets over time.
Keywords: Enron, corporate governance, shareholder value, internal control, non-executive directors, monitoring board, stewardship
JEL Classification: G38, K22
Suggested Citation: Suggested Citation