The contribution of Enron’s directors to the company’s demise can be briefly described as unfulfilled fiduciary duties. Generally, directors are wholly responsible for governing and directing the company’s affairs in the best interests of the company as a whole and its shareholders (Shailer 2004). Therefore, they are required to act in honesty, reasonable care, and competence (Brooks 2004; Kemper and Levine 2003; Shailer 2004). As the highest level of the hierarchical corporate governance structure, Enron’s Board of Directors not only must have known about but also supported the company’s questionable strategies, criticised policies, and devious transactions (Clark and Demirag 2002). Accepting high-risk accounting practices All Enron’s Board members were well aware of and supported Enron’s strategies, which aimed at maintaining its investment-credit rating, increasing cash flows, and reducing its debt burden (United States Senate’s Permanent Subcommittee on Investigations 2002), although they claimed to be victims of a cruel hoax and to be misled and uninformed about key activities and plans of the company. The Board not only was well-informed but also authorised numerous “hedging” transactions that were handled by Enron’s SPEs (Powers, Troubh and Winokur 2002). The Board, especially Kenneth Lay (the Chairman and also the CEO), was warned of the risk of “accounting scrutiny” by performing these transactions at the Finance Committee in May 2000, yet the Board completely neglected “red flags” and approved a series of hedged contracts with its SPEs that were designed to help Enron avoid reflecting losses caused by falls in its merchant investments on its income statement (Millon 2003; Powers, Troubh and Winokur 2002; Schwarcz 2002). Moreover, it was the Board that allowed Andrew Fastow – the CFO – to establish, and even worse, to become the sole manager of the private equity fund (named LJM Cayman LP and known as LJM1) to do business with Enron, which apparently lacked economic substance (Brooks 2004; Powers, Troubh and Winokur 2002; United States Senate’s Permanent Subcommittee on Investigations 2002). He was also approved to become the general partner of some other partnerships that were deliberately set up to make profits at Enron’s expense. The significant effects of these breaches on Enron’s financial position were that debts were moved off Enron’s balance sheet and earnings and cash flows were inflated. In addition, the Board also supported an “asset light” strategy, or “syndicating” the assets, which allowed Enron to transfer several billion dollars worth of its assets with a slow generating cash flow to its “unconsolidated affiliates” and record exorbitant earnings (United States Senate’s Permanent Subcommittee on Investigations 2002). However, such “unconsolidated affiliates” did not meet the requirements for being unconsolidated. Further, the Board was adequately informed of the increases in making use of “prepay” transactions, of which prepayments were wrongly treated as a trading liability and cash flow from operations, instead of debt and cash flow from financing (Roach 2002). By reviewing such facts, there is little doubt that Enron’s Board knew about, and officially approved of, the application of high-risk accounting practices, specifically billions of dollars in off-the-books activity, which aimed at significantly improving its financial position.