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Law and CapitalismWhat Corporate Crises Reveal about Legal Systems and Economic Development around the World$
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Curtis J. Milhaupt and Katharina Pistor

Print publication date: 2008

Print ISBN-13: 9780226525273

Published to Chicago Scholarship Online: March 2013

DOI: 10.7208/chicago/9780226525297.001.0001

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The Enron Scandal: Legal Reform and Investor Protection in the United States

The Enron Scandal: Legal Reform and Investor Protection in the United States

(p.47) Three The Enron Scandal: Legal Reform and Investor Protection in the United States
Law and Capitalism
University of Chicago Press

This chapter discusses the collapse of Enron and its aftermath. Enron's breathtakingly rapid unravelling in 2001 threw a good deal of cold water on the perception that the United States had reached the zenith of legal and corporate governance. This perception had been building throughout the 1990s, propelled in part by the law and finance literature. The chapter opts for a simple rendition of the crisis, because the precise mechanics of Enron's accounting fraud are less important for its purposes than situating the event in the contemporary U.S. market and legal structures. The Enron saga vividly underscores that all market-oriented economies, however highly developed, require constant regulatory recalibration; the legal infrastructure for a capitalist economy is always under construction. The chapter also shows how a decentralized and highly protective legal system helps give rise to and responds to a corporate crisis. The legal response to the Enron debacle and other corporate scandals in the United States in the name of investor protection has proved to be almost as controversial as the underlying events.

Keywords:   Enron, United States, corporate governance, accounting fraud, capitalist economy, legal system, corporate scandals, investor protection

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