DQ 8.1:A majority of Enron's board of directors were independent. One of the Enron directors was a former dean of Stanford University's Graduate School of Business. Another director was the former chairwoman of the Commodities Futures Trading Commission. Enron's board hired the highest quality law firm (Vinson & Elkins) and independent auditors (Arthur Anderson). Enron had blue ribbon compliance policies in place and procedures for evaluating relatedparty transactions and conducting internal investigations. The board of directors had an Audit and Compliance Committee and a Compensation Committee. Notwithstanding all of the independent and highly qualified gatekeepers who worked for or closely with the corporation, an accounting scandal lead to the collapse of Enron in 2001.

a) Why did Enron's compliance programs fail?

b) What steps might senior executives or directors take to prevent such a compliance failure?

c) If you were an independent member of Enron's board of directors and someone presented you with evidence that senior executives acted to inflate the company stock price and deceive auditors, journalists, investors and regulators, what steps would you take to protect the company? Describe how you would navigate the competing interests in disclosure and shareholder interests in ensuring that the company's shares trade at the highest possible price.