How Corporate Governance and Globalization Can Run Afoul of the Law and Good Practices in Business: The Enron's Disgraceful Affair

Universidad del Cema Working Paper No. 225

49 Pages Posted: 18 Feb 2003

Date Written: 2003

Abstract

The purpose of this paper is to set out the Enron's demise into the perspective of Corporate and Global Governance. To accomplish this target, the incremental cash flow model is expanded to give room for governance issues, while a functional introduction to information sets is developed, including bounded rationality, asymmetric information, opportunistic behavior, transaction costs and agency problems. Then, corporate governance is linked to globalization by means of some recent approaches that go beyond a narrow economic mindset to encompass a far-reaching dynamics. Taking advantage of such background, the Enron's story is tracked down over a span of fifteen years since its starting day to its bankruptcy filing. Leading events are explained from corporate and global governance viewpoints, while an in-depth analysis is worked out on Enron's complex game of deception and breach of contracts: the outrageous affiliated limited partnerships, the lavish pay package to its executives, the involvement with global governance through the Indian affair and the Taliban connection. It is for the incremental cash flow model to explain malfeasance with cash flows from assets, and how cash flows to creditors were actually contrived. Furthermore, to highlight how cash flows were swindled from stockholders and, finally, how Enron made wheeling and dealing with cash flows on behalf of its managers.

Keywords: Corporate governance, global governance, incremental cash flow model, globalization, information sets, good practices

JEL Classification: G30, K22, F40

Suggested Citation

Apreda, Rodolfo, How Corporate Governance and Globalization Can Run Afoul of the Law and Good Practices in Business: The Enron's Disgraceful Affair (2003). Universidad del Cema Working Paper No. 225. Available at SSRN: https://ssrn.com/abstract=368820 or http://dx.doi.org/10.2139/ssrn.368820

Rodolfo Apreda (Contact Author)

University of CEMA ( email )

Department of Finance Room 612
Buenos Aires, C1054AAP
Argentina
5411 6314 3000 (Phone)
5411 4803 0429 (Fax)

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