Corporate Governance after Enron: The First Year

Abstract

In the aftermath of Enron and other corporate failures in the post-bubble economy, the menu of possible regulatory responses included federal regulation, state corporate law, or governance by self-regulatory organizations such as the stock exchanges. This commentary sets out the response of each actor in the first year after Enron and examines why state law chose to stand pat during this period. Part II examines a related problem posed by Enron - did it push the envelope in the use of separate entities as much as it appeared to do in accounting treatment? It compares Enron's use of SPEs to more familiar uses of separate entities in piercing the corporate veil contexts and concludes that the traditional corporate remedies of piercing, bankruptcy, or personal liability are likely to be less effective than disclosure is addressing future abuses of the type that arose in Enron.

Keywords: Corporate Governance, Special Purpose Entities, Enron, Sarbanes-Oxley, Corporate Entity

JEL Classification: K22, K2, G34