Asymmetrical Information

Robert Musil makes a couple

Robert Musil makes a couple of interesting points about Enron: first, that while the board may have been captive (in other words, management led them around by the nose), the culprit is more likely ignorance than malfeasance, since the board members were unlikely to deliberately open themselves up to the kind of liability they're facing for the amount they were paid. He also says that the accounting was not deliberate fraud. I think that depends on what the meaning of "fraud" is. They may have barely skated the line of legal by getting their accountants to sign off on their transactions, but I think that they were certainly aware that the financial statements misstated their true condition to the point of gross fiduciary breach. But read them and decide for yourself.