Enron: widespread myopia
Enron: widespread myopia
Chabrak N., Daidj N. Critical Perspectives on Accounting July 2007, Vol. 18 No. 5, Start page: 539, No. of pages: 19
Purpose – To re-examine the causes and predictability of Enron’s collapse. Design/methodology/approach – Uses an approach based on resources and competences to examine four phases of Enron’s development strategy and shows that it moved too far away from its core business, pursued unrealistic goals and grew too fast to actually consolidate its new businesses. Refers to other research which admits that US GAAP allowed Enron to obscure the economic reality underlying its transactions while its auditors failed to detect or signal fraud. Gives examples of how a “widespread myopia” which refused to see what was really happening at Enron was fostered, e.g. by the use of quasi-religious and patriotic references by its senior managers – both powerful persuaders in US society. Notes that five days before Enron’s collapse, only two out of 15 top analysts recommended selling its shares and considers possible reasons why people chose not to see its problems. Suggests that they were blinded by greed and points out that the Sarbanes-Oxley Act is not an answer to this problem. Originality/value – Examines the Enron collapse in the light of economic reality instead of accounting and auditing technicalities.ISSN: 1045-2354Reference: 36AU346DOI:10.1016/j.cpa.2005.10.004
Keywords: Accounting research, Company failures, Competences,Corporate strategy, Resources, USA
