1. Based on what you read in this chapter, summarize in one page or less how you would explain Enron s ethical meltdown. For many people, a company called Enron Corp. still ranks as one of history s classic examples of ethics run amok.

During the 1990s and early 2000s, Enron was in the business of wholesaling natural gas and electricity. Rather than actually owning the gas or electric, Enron made its money as the intermediary (wholesaler) between suppliers and customers.

Without getting into all the details, the nature of Enron s business and the fact that Enron didn t actually own the assets meant that its accounting procedures were unusual.

For example, the profit statements and balance sheets listing the firms assets and liabilities were unusually difficult to understand.

It turned out that the lack of accounting transparency enabled the company s managers to make Enron s financial performance look much better than it actually was. Outside experts began questioning Enron s financial statements in 2001. In fairly short order, Enron collapsed, and courts convicted several of its top executives of things like manipulating Enrons reported assets and profitability.Many investors

(including former Enron employees) lost all or most of their investments in Enron.