AN MCS PERSPECTIVE

Mandar Ghayal - 0205 Ketan Patil 0218 Sagar Makode 0231 Pradnya Dharaskar - 0271

AGENDA
HISTORY

KEY PEOPLE
WHO ALL FAILED??? MANAGEMENT FAILURE MEASURES FOR PREVENTION FINANCIAL FAILURE & MEASURES FOR PREVENTION REFERENCES

HISTORY
1985 Formation of ENRON from HNG/InterNorth 1990 Jeff Skillings joins ENRON, becomes CEO ENRON Financial Corp. 1990 Jeff Skillings hire Andrew Fastow 1996 Fastow starts constructing off book entities to hide debts 1998 Fastow becomes CFO 1999 - Enron board of directors waive conflict of interest rules in order to allow Fastow to own/run private companies that do business with Enron.

HISTORY
15 Aug 2001 Sherron Watkins writes one page letter to Lay questioning Enrons accounting practices 22nd Oct 2001 SEC begins its probe 29th Nov 2001 SEC begins Arthur Anderson probe Mean time David Duncan destroys the ENRON documents at Arthur Anderson. 11th July 2003 ENRON files for Bankruptcy Trials Begin

KEY PEOPLE
Kenneth Lay CEO ENRON Jeffery Skilling CEO ENRON Fin. Corp( Later CEO ENRON) David Duncan Arthur Anderson Auditor for ENRON Andrew Fastow CFO ENRON Sherron Watkins Whistleblower( Vice president for corporate development)

Who All Failed???

Enron Board of Directors Enron Top Management
Shortsighted Blind faith on handpicked executives

Audit Functions ARTHUR ANDERSEN Securities & Exchange Commission [SEC]

Failure to check Enrons books

Wall Street Analysts & Business Press

Failed to ask right questions & Probe Enrons performance

MANAGEMENT FAILURE
Strategy
Diversification

Culture
Lack of transparency, communication flow Employees chased high valued deals for larger bonuses Rampant Rule-bending Rampant extravagant spending

Focus & Direction

Confusion regarding business model Obsession with short term profits Obsession with stock price & stock performance

MEASURES
Avoiding Conflict of interest from the very beginning Larger involvement of Board in management & operations Sticking to the Code of Conduct & Ethics Periodic Audits & Evaluations for Course correction Internal control mechanisms for:
Maintaining Proper work environment BOD Approvals for new ventures Goal achievement in accordance with company strategy

FINANCIAL FAILURES
Failure Mark-to-Market Accounting Financial Reporting of Enrons SPE Measures Undertaken Sarbanes-Oxley Act Public Companies Accounting Oversight Board

Improper reporting of shared issues

Audit Issues

Certification by CEOs and CFOs of Fairness and Financial Reporting

STOCK PRICE CHART

REFERENCES
THE CASE OF THE CROOKED E AND THE FALLEN A Gary M. Cunningham & Jean E. Harris McLean, Bethany; Peter Elkind (2003) The Smartest Guys in the Room THE CATO Institute REVIEW OF BUSINESS AND GOVERNMENT 2003

Jenkins, J. Gregory, The Enron Collapse

Enron; Enron Scandal; Enron Scandal Timeline Wikipedia

THANK YOU!