“when Genius Continues To Fail: What We Didn’t Learn From Penn Square Bank, Enron, And Chesapeake Energy,” By J. C. Whorton, Jr. And Richard S. Shuster

Transcript

This paper compares three case studies—Penn Square Bank, Enron, and Chesapeake Energy— in which lapses in corporate governance between senior management and the best interests of the major stakeholders occurred. Penn Square Bank was a privately held bank federally regulated by the Comptroller of the Currency and the Federal Deposit Insurance Corporation (FDIC). Enron Corporation was a high-profile publicly traded corporation with very visible controls, policies, and procedures in place while key employees committed fraud and criminal acts to circumvent public transparency in reporting. While both Penn Square Bank and Enron are now insolvent entities, Chesapeake Energy Corporation is a going concern but it has serious corporate governance and financial issues that must be addressed to ensure its future viability. In particular, this article highlights the governance challenges that Chesapeake faces, which are similar to other public companies that are run by the original founders and managed and governed as though they were still privately-held enterprises with little or no accountability. As the authors examine these three examples over the last 30 years each is irrefutable proof that the more things change, the more they stay the same; leading them to question, why does it always seem that every lesson must be relearned by a new generation? (This was published as J. C. Whorton, Jr. and Richard S. Shuster, “When Genius Continues to Fail: What We Didn’t Learn from Penn Square Bank, Enron, and Chesapeake Energy,” Occasional Paper 48, Boulder, Colorado: The International Research Center for Energy and Economic Development, 2013. ISBN 0-918714-74-5. )