Institution Name: Arab Academy Graduate School of Business Programme: Wales MBA Program Module: Managerial finance

Assignment

Assignment Title: Individual Assignment 1:

Marking Scheme included

Submitted to: Dr. Mohamed Hashem

Prepared by: Ahmed Mustafa Mohamed Hassan

Q1. Corporate governance: is the set of processes, customs, policies, law, and institution affecting the way a corporation is directed, administrated or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goal for which corporation is governed. In contemporary business corporations, the main external stakeholder groups are shareholders, debt holders, trade creditors, supplier, customers and communities affected by the corporation's activities. Internal stakeholders are the board of directors, executives, and other employees.

In the case of Enron Company both external and internal corporate governance were factors which contributed to Enron failure. I believe that Enron primarily failed in the internal corporate governance system, because it relate to the board of director and management who are the agents of the shareholder and they are responsible for keeping the current value and creating new values for the shareholder. Enron board of director and management were looking mainly for their own benefit and ignoring their responsibility of protecting all shareholders in the company, as well as these special purpose interties SPEs allowed Enron board and management to report non existence profits and to hide the losses they made. In addition to that the poor financial control and the unethical partnership with the internal and external auditor, all that and more leaded to the pad business dissuasion and the failure of Enron1.

Q3. Although Enron Company was operating within the same basic corporate governance system as all publicly traded firms in the U.S many people would believe that this was an isolated incident, not only because of the bad and unethical business dealing but also because of the illegal and criminal actions had been taken by Enron board and management

http://en.wikipedia.org/wiki/Corporate_governance

Q2.

Issuing debt instrument widely to Enron without considering why the need for a continuous flow of external capital.

Creditor
Strict rules for lending - Transparency Set personal relationship at work a side

Auditing company was tied up with Enron in both Auditing and consulting business. Writing poor financial report in order to satisfy Enron management and fear of losing their consulting business.

Auditor
Interdependent - Transparency Honesty, credibility and business ethics.

Too confidant to the management performance. Have less responsibility and power.

Stockholders

Have more control and power. Showing interest to know why each decision had been taken by the management and on what basis.

Congress deregulated the industry. Corruption due to the personal relation with Enron board. Overlooking certain actions taken by Enron board and its auditor.

Regulator

Should put working mechanism in place and enforcing companies to carry out their social responsibilities to their shareholders and employees. Compulsory rotation of auditors.

What Stake-holder did

what stake-holder could do?