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The Social Impact of Business Failure: Enron

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  • Uma V. Sridharan
  • Lori Dickes
  • W. Royce Caines
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    Abstract

    Between October and November 2001 the world witnessed the collapse of Enron, a major US publicly traded corporation with global operations. The Enron case highlights the impact corporate failure has on American society and capital markets and underscores the need for better enforcement of regulations and ethical business behavior. This paper discusses the role played by EnronÕs senior management, its board of directors, EnronÕs auditors, consultants, bankers, Wall Street and the government, in the spectacular rise and fall of this corporate giant. It also examines the impact of EnronÕs failure on its employees, the employees of Andersen, and on thousands of ordinary Americans who invested in the stock via their pensions and mutual funds. This paper highlights the conflicts of interest that pervade the financial system and discusses the social and financial impact of a combined business and oversight failure. Students and teachers of finance, corporate governance, and business strategy may be interested in this paper as a pedagogical tool to teach undergraduate finance, business ethics, business strategy, and corporate governance.

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    File URL: http://www.emeraldinsight.com/journals.htm?issn=1935-5181&volume=17&issue=2&articleid=1917812&show=abstract
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    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal American Journal of Business.

    Volume (Year): 17 (2002)
    Issue (Month): 2 ()
    Pages: 11-22

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    Handle: RePEc:eme:ajbpps:v:17:y:2002:i:2:p:11-22

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    Related research

    Keywords: Board of directors; Business ethics; Corporate governance; Financial transparency; Mutual funds; Pension funds; Securities acts; Social impact; Strategy;

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    References

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    1. Zaima, Janis K & McCarthy, Joseph E, 1988. "The Impact of Bond Rating Changes on Common Stocks and Bonds: Tests of the Wealth Redistribution Hypothesis," The Financial Review, Eastern Finance Association, vol. 23(4), pages 483-98, November.
    2. Doron Kliger & Oded Sarig, 2000. "The Information Value of Bond Ratings," Journal of Finance, American Finance Association, vol. 55(6), pages 2879-2902, December.
    3. Hand, John R M & Holthausen, Robert W & Leftwich, Richard W, 1992. " The Effect of Bond Rating Agency Announcements on Bond and Stock Prices," Journal of Finance, American Finance Association, vol. 47(2), pages 733-52, June.
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    Cited by:
    1. Ajnesh Prasad & Albert Mills, 2010. "Critical Management Studies and Business Ethics: A Synthesis and Three Research Trajectories for the Coming Decade," Journal of Business Ethics, Springer, vol. 94(2), pages 227-237, August.
    2. Philip R.P. Coelho & James E. McClure, 2005. "Learning from Failure," American Journal of Business, Emerald Group Publishing, vol. 20(1), pages 12-20.

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