Enron's board was a study in failure that facilitated the company's collapse by allowing high-risk business practices and giving free rein to the executives engaged in them, a US Senate panel said yesterday.
Members of the board - which was itself compromised by conflicts of interest - let Enron move nearly half its assets off the balance sheet to make the company's financial statements look better, the Senate Permanent Subcommittee on Investigations said.
Board members were paid $350,000 a year but failed in their fiduciary obligations, looking the other way as accountants pushed the limits of accepted practice and executives enriched themselves at Enron's expense, the panel said in a new report.
"Much that was wrong with Enron was known to the board," concluded the report by the subcommittee headed by Senator Carl Levin, a Michigan Democrat.
"By failing to provide sufficient oversight and restraint to stop management excess, the Enron board contributed to the company's collapse and bears a share of the responsibility for it," the report said.
The subcommittee's report summed up a hearing held in May and extensive interviews with 13 past and present Enron board members.
It also noted that as of April, when the subcommittee's interviews took place, none of the board members had been questioned by federal agencies that had opened investigations into Enron, including the US Justice Department and the market-regulating Securities and Exchange Commission.
Houston-based Enron announced its bankruptcy on December 2nd, 2001, after its stock collapsed amid allegations that Enron accountants hid corporate debt to boost overall profits.
No one from the company has been charged with any crime, although three British bankers who dealt with its partnerships have been charged with wire fraud and Enron's auditor Andersen has been convicted of obstruction of justice.
An attorney for the board members, Mr W Neil Eggleston, could not be reached for comment. But he told the New York Timesthe report unfairly criticized the board, which he said had been misled by management and outside auditors.
At the May hearing, board members said they had depended on Enron's management and Andersen to tell them the truth. "We had no cause for suspicion until it was too late," said Mr Robert Jaedicke, who chaired the Enron board's audit committee and is a former dean of Stanford University Business School.
But the author of a Senate bill to improve corporate governance, Senator Paul Sarbanes, said the report was proof his legislation was needed to stiffen the spine of boards supervising management.
Since Enron's collapse, a string of corporate scandals have reignited interest in corporate reform, and President Bush is to give a speech on the subject tomorrow.
The subcommittee report said the Enron board ignored numerous red flags and "knowingly allowed Enron to engage in high-risk accounting practices," even though Andersen itself said these methods "push limits."