Lessons from Enron: a Symposium on Corporate Governance--foreword - Patrick Emery Longan

• Citation: Vol. 54 No. 2
• Publication year: 2003

Lessons From Enron: A

Symposium on Corporate

Governance

Forewordby Patrick Emery Longan*

The first time most people ever heard of the Enron Corporation was long after the company had become well known in business circles. Throughout the 1990s, the Enron Corporation had grown rapidly from a small traditional natural gas pipeline company to a huge and innovative presence in national and international markets for energy. In business circles, Enron made a name for itself. Yet despite its size and (by the measures of the time) incredible success, Enron was not a household name. The company, however, found a way to change that. In April 2000 the Houston Astros played their first game in their new stadium. Enron had agreed to pay more than $100 million over thirty years for the right to name that stadium "Enron Field." Every fan of major league baseball learned the name "Enron."

Now we know that Enron need not have gone to such lengths and expense to raise its visibility. After October and November 2001, most Americans knew a great deal more about Enron than its name, and what they knew had nothing to do with baseball. They knew that the company had surprised investors and employees with an announcement of a third quarter loss in excess of $600 million. They knew that Enron stock had gone from $80 a share to 61 cents per share in less than twelve months.¹ It also became well known that corporate insiders had sold millions of dollars worth of stock before the collapse but that employees, whose retirement funds were over-loaded with Enron stock, had been unable to sell during one crucial period. Most people also learned that Enron's stock price had been kept artificially high by the aggressive use of sophisticated accounting techniques approved by Arthur Anderson, LLP, which in turn had admitted to the wholesale destruction of documents related to Enron. People knew more about Enron, perhaps, than they wanted to know.

Today, "Enron" has gone beyond name recognition. It has become a part of the language. The name has become synonymous with corporate greed, deceit, and failure. The collapse of the Enron Corporation has already become a milestone in the history of American business, and events are described as "pre-Enron" and "post-Enron." Like the Watergate scandal for an earlier generation, the Enron failure is destined to be the standard against which later debacles are measured. Also like Watergate, it has spawned a series of reforms intended to prevent similar...