Enron Flaws In Organizational Architecture And Its Failure

A series of corporate scandals at the beginning of last decade has given rise to the doubt on the efficiency of corporate governance practice in the United States. Of these scandals the collapse of Enron has exceptionally captured the public concern. It was the once seventh-largest company in the United States 1. It was rated the most innovative large company in America in Fortunes Most Admired Companies survey 2. In August 2000 its stock reached a peak of nearly 70 billion 3. However within a year its stock had become almost useless papers 2. It just was unbelievable for many people. What went wrong Was it due to the failure of corporate governance in general Actually the central factor leading to the collapse of Enron was the failure in its organizational architecture. This paper starts by providing an overview of corporate governance system with an emphasis on the corporate organizational architecture as its important facet. Then it discusses flaws in the organizational architecture of Enron and argues that these eventually led to the breakdown of the whole corporate governance system at Enron. Finally some implications and lessons for the practice of corporate governance are presented.