Marc Massoud, CMC’s Robert A. Day Distinguished Professor of Accounting, has been at the forefront of academic study and discussion of an event at the center of media clamor: the fall of Enron.

“You don’t have to understand accounting to understand the issues,” Massoud says. He has led discussions of these issues in a panel presentation sponsored by International Place in February, a presentation at the Drucker School of Management, and in several CMC economics courses, including Professor Ron Teeples’ ethics and management course.

In a handout prepared for the I-Place panel, Massoud described the problem with the following metaphor: “You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you can get all four cows back, with a tax exemption for five cows. The milk of the six cows is transferred via an intermediary to a Cayman Island Company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on one more!”

Discussing the Enron case with his students has provided the perfect opportunity for Professor Massoud to discuss ethics with his students. He says it is important to make a decision based on a value system, and to be driven by self-esteem and respect rather than by financial reward.

Professor Massoud will continue to study the Enron case while on sabbatical next year, selecting it as the focus of his research. We asked him to highlight a few of the lessons he sees still being learned from the debacle:

Employees should diversify the investment in their retirement plans and the government should set a limit on how much should be invested in the company’s stocks. Reform is needed in the pension and 401(k) plans.

Reform is needed in the corporate governance area, and in the role of the audit committees.

A stronger oversight board should be created to help oversee the accounting industry.

The Financial Accounting Standard Board (FASB) must step up and develop accounting standards that meets the new economy’s needs with more disclosure on the off-balance-sheet transactions.

The budget for the SEC should be increased to allow the hiring of additional oversight staff.

Fewer regulations are better. We have the best financial reporting system in the world and we should keep it in the private sector. The accounting firms have already made a decision to concentrate on their auditing/tax functions and limit their consulting activities to eliminate any conflict-of-interest issues. As a result, the U.S. corporate system will emerge stronger and more effective.

The fall of Enron has been an impetus for meaty discussions on ethics among students and professors.