Reading Summary: Enron and Arthur Andersen

The article described the rise and fall of the Enron Company during the period of time that managed by several executives. The deregulation of public utility industries gives Enron chance to make profit by trading energy as commodity in the open market. Thus, Enron ranked the seventh largest of the Fortune 500 at the year of 2000.

However, for the purpose of rise company shares and control current risk of company, Enron deals agreements with internal related companies, which is owned by Enron executives, in order to rise company value and increase stock price. These special purpose entities (SPEs) overvalued Enron’s share about 600million and finally drove company to bankruptcy.

Three main aspects point out by author that indicates how Enron Company filed for bankruptcy. Firstly, rather than hedging its risk by entering into contract with independent third parties, Enron entering agreement with its own executives company to control risk level. Secondly, Enron’s Chief Financial Officer Andrew Fastow fully controls trading agreements between Enron and SPEs, which means he can make personal profits by cheat other investors. Thirdly, the accounting firm—Arthur Andersen, which have responsibility to providing allegedly unbiased and accurate financial reports to help investors decision making whether invest or not into a corporation. For the purpose of keep receiving huge amount of consulting and advising fees from Enron, Andersen auditors also involved in to keep Enron’s balance sheet less debts and cheat investors.

This article reveals business ethical problem by using Enron and Arthur Andersen as specific example. As executives of Enron, deals personal company agreement to hedging risk and make profit from other investors is illegal in modern society, but in 2000, the deregulation environment induce people been