ENRONIntroductionEnron was the nation's largest trader and distributor of electric power and natural gas. Its main business was to buy energy at a negotiated price and, later, resell it when prices increased. As an energy broker, Enron provided a service by allowing producers to negotiate a certain price while Enron took the risk that prices would fall below the energy it purchased. Energy buyers also benefited because Enron was able to secure energy supplies. In 2000, Enron was ranked fifth on the Fortune 500. What happened to the company that was among the most admired for its vision and thinking about quality? Enron was the company that held virtual assets and not real assets, such as power plants, which represented a financial incentive with low returns and ongoing debt. The market decline beginning in 2000 exposed the financial structure Enron was built on, ultimately forcing the company into bankruptcy. The main reason was special purpose entities. According to the law, a company can create an SPE for a particular purpose. The debt of the SPE is recorded in the books of the creating company. However, it could be transferred to the SPE if an independent third party purchased a minimum 3 percent stake in the SPE. This financial structure became Enron's favorite; he created more than 900 SPEs. During the 1990s, Enron created special entities to move its debt off balance sheet. Enron created companies, sometimes joint ventures or partnerships. To capitalize these companies, Enron sometimes found investors; they were Enron executives or friends. Sometimes there was no “investment.” The actual structure violated the legal requirements of the SPE. Enron used its working relationship with Merrill Lynch...... middle of paper ...... companies need someone outside the company, constantly asking good questions in order to avoid ethical situations. Another important duty of board members is to understand the activities of directors in order to avoid conflicts of interest. The main area of ​​concern is investigations into reports of ethical misconduct by administrators. These investigations can be serious matters that require thoroughness and tact. Even if initial incidents appear frivolous, investigations can reveal serious ethical lapses. The board of directors may engage external investigators as part of the corporate governance program to investigate all reports and conduct of directors. ReferencesBohlman, HM (2005). The legal, ethical and international business environment. Thomson South West. Scharff, M. (2005). WorldCom: a failure of moral and ethical values. Journal of Applied Management and Entrepreneurship .