Enron: Visiting the Immersed Part of the Iceberg

Abstract

According to the thousands of pages of official reports, enquiries and studies that have already been devoted to Enron, its collapse can be attributed to a coincidence of a number of dysfunctions and malfunctions within the firm, but also in its immediate environment. Each of these ‘local problems’ has been scrutinized, analysed and, in some most visible cases, addressed at a regulatory level. Despite all these efforts, however, a more fundamental question remains on the internal composition of the multi-causal knot that led to Enron’s collapse. Was the collapse exceptional, resulting from an accidental combination of unrelated, independent and unique incidents, or was it the spillover of a chain of linked, correlated, interdependent or even mutually reinforcing routine events? In the latter case, Enron’s collapse would have been much more than an accident. It would be symptomatic of deep systemic dysfunctions, the suspicion of which may, in the last analysis, put trust in the financial system in doubt, and thereby put the system’s very survival at risk. This systemic concern may grow deeper once it is acknowledged on one side the cementing role trust plays in any financial relation, and on the other the everyday longer list of corporate malpractices or wrongdoings on which Enron will remain a milestone for a long time.