Rose-Colored Glasses, Opaque Financial Reporting, and Investor Blues: Enron as Con and the Vulnerability of Canadian Corporate Law

This Article suggests that while there is an element of "Enron as con," Enron's collapse is also attributable to more systemic problems in both corporate law and securities regulation. Enron is extraordinary not only for its systems failure but also for the breadth and depth of harm inflicted on investors, workers, and creditors. Although some initially believed that Enron was an outlier in terms of its failed governance, it was quickly followed by the collapse of WorldCom, with 65,000 employees, and several other publicly traded companies. These failures collectively reveal serious systemic problems with the current corporate governance paradigm. Enron and the subsequent revelations at other large U.S. publicly traded corporations have challenged the widely accepted belief that our system of regulation, disclosure, and market adjustment adequately protects investors, employees and pensioners. The current governance structure of Canadian corporations is vulnerable to some of the same confluence of factors that resulted in a failure of governance at Enron. In Canada, there may be additional factors as a result of our publicly traded corporations being largely closely held.