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Obligations of the Board of Directors

Today in the US, many corporations can influence both the politics and the economy of the country. Corporations fund future presidents’ political campaigns, set the agenda for journalists with stunning scandals, and invest heavily in new businesses and jobs. Therefore, it is imperative to understand the board of directors’ responsibilities and specifics of internal relations between people holding certain positions in the corporation. This paper aims to present a concept of the board of directors’ obligations and discuss how these obligations may be distorted on the example of the Enron scam corporation.

Definition and Explanation for the Concept

Since the corporation is a rather complex structure, the relationship’s complexity sometimes covers dishonest or irresponsible behavior. An organization’s charter usually defines the board of directors’ responsibilities and obligations (Price, 2018). Besides, job descriptions detail the duties of directors. Typically, the chairman of the board of directors’ primary liability is to lead and direct the board. The board chairman must be aware of all decisions the board makes and must have strong relationships with directors, CEO, managers, corporate secretary, and committees.

Simultaneously, the purpose of the board’s existence is to represent a diverse and independent perspective. The main task of the board members is to carry out strategic planning. Therefore, directors who sit on the board meetings should critically assess the corporation’s performance and ask challenging questions to reveal all sides of the problems (Price, 2018). They also need to be well informed and involved in critical processes to identify and manage risks. Thus, the board of directors is responsible for solving any problems that the corporation’s business faces. At the same time, the corporate secretary often has a legal and accounting education and performs as the corporation’s authorized representative.

Summary of the Film

Enron: Smartest Guys in the Room is a documentary that describes the most striking scandal of 2000, namely, the fall of the Enron Corporation, which turned out to be a common scam. Responsible persons such as chairman Ken Lay and his appointed CEO Jeff Skilling carried out a series of fraudulent activities, making billions of dollars, staying confident that they would get away with it. However, after their actions crossed all boundaries, Lay and Skilling, as well as other stakeholders, got what they deserved. Many were sent to prison; some did not live to be released or even imprisoned.

How the Film Illustrated the Concept

Americans were outraged by the inhumanity and rudeness with which Enron manipulated the stock markets, influencing the formation of electricity prices through multiple blackouts in California. Although ordinary employees of the company received an average salary, board members have accumulated billions of dollars quickly. They received this money, in particular, from the residents of California, who were forced to buy electricity from the state at a hugely inflated price. As a result, the Governor of California lost his political influence and was replaced by the famous actor Arnold Schwarzenegger.

The chairman of the board of directors invested considerable sums in the political campaign of George W. Bush before he became president in 2000. Instead, the state did not intervene in the company’s illegal activities until these activities took on a truly staggering scale. It is noteworthy that ordinary employees were treated harshly. Jeff Skilling developed a scale from 1 to 5, rated their work, and fired up to 10% of staff every month, creating powerful internal competition and unhealthy relationships in the team. After the facts of fraud were proven and the company went bankrupt, more than 29 thousand employees hired by the company lost their jobs. Therefore, this film presents all types of violations of the board of directors’ obligations.

Thus, a concept of the obligations of the board of directors concept was presented. Besides, it was discussed how these obligations might be distorted on the example of Enron scam corporation. The behavior of the board of directors, chairman Ken Lay and CEO Jeff Skilling, can be considered extremely irresponsible. They knew about the fraud that was taking place in the company; moreover, they initiated it.

Reference

Price, N. (2018). The roles and responsibilities of a board of directors. Web.

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Essay4Business. (2022, April 14). Obligations of the Board of Directors. Retrieved from https://essay4business.com/obligations-of-the-board-of-directors/

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Essay4Business. 2022. "Obligations of the Board of Directors." April 14, 2022. https://essay4business.com/obligations-of-the-board-of-directors/.

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Essay4Business. (2022) 'Obligations of the Board of Directors'. 14 April.

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