In the late 1990s, the state of California deregulated many of its electricity markets, opening them up to private sector energy companies. Enron Corporation had long lobbied for deregulation of such markets and would likely have profited greatly had California's experiment succeeded and become a model for other states.

Enron CEO and the chairman of the Board of Directors Ken Lay wrote a public statement saying that Enron "believes in conducting business affairs in accordance with the highest ethical standards... your recognition of our ethical standards allows Enron employees to work with you via arm's length transactions and avoids potentially embarrassing and unethical situations." At the same time, Tim Belden, a key Enron employee in its energy trading group, noticed that California's "complex set of rules...are prone to gaming."

Some Enron employees admitted that their schemes were "kind of squirrelly," but used them because they were profitable. The impact on customers was clear: electricity prices rose and rolling blackouts occurred. Enron's profits, however, quadrupled. An Enron lawyer later wrote that the Enron traders did not think "they did anything wrong." Another employee admitted, "The attitude was, 'play by your own rules.' ...The energy markets were new, immature, unsupervised. We took pride in getting around the rules."

In October 2001, Enron's unethical and illegal business practices became public knowledge. Enron's stock prices plummeted, and the company filed for bankruptcy in December 2001.

1. Explain the Dilemma in the above case? (2 marks)

1. Explain the type of conflict shown in the case. (2 marks)

1. From a corporate governance perspective, what is wrong with the structure of the company? Explain. (2 marks)
2. Is it ethical to blow the whistle in this case? Justify your answer based on the conditions you have learned that make whistle-blowing an ethical act. (4 marks)

1. Which department is concerned with the dilemma?How can this department solve the dilemma/conflict?(3 marks)