Enron Scandal, Essay Example

Enron was the seventh largest American corporations employing over 21,000 staff.  Over 40 countries worldwide.  They became involved in one of the biggest deception fraud in American corporate history.  The deception resulted in the firm going bankrupt in December 2002.

The implications of false accounting practices also created the collapse of the Andersen auditing firm.  The scandal also implicated politics, as it illustrated millions of dollars being ploughed into the Bush election campaign.  Fallout even entered  the UK political arena, and the Labour Party.  When Enron’s accountants (Andersen’s)  had been removed from a government blacklist after the DeLorean car scandal.  There were 34 criminal defendants in the case and off these 18 pleaded guilty.  The jury convicted 4 more, 2  were acquitted and 3 had convictions overturned.  2 cases were dropped and 3 new convictions emerged.  It might be argued that justice was served in the prosecution, conviction of many involved, but the fact that Enron employees invested in average 60% of their retirement plans, and the creditors lost billions of dollars on the collapse within excess of 1000 companies involved.

The death of Enron founder Kenneth Lay, left many shareholders feeling cheated for prosecution and inserting an appropriate prison sentence. The ethical considerations of Enron relate to the behaviour of the Directors, Accountants and Lawyers. Enron gave large sums to various charities but that alone does not discharge ethical responsibility. Directors are supposed to be accountable to the shareholders and as such it is unlawful for the Enron Chairman ( having insider price information) to trade in stocks with that knowledge.  “Enron senior management gets a failing grade on truth and disclosure” (Berenbeim, 2002).

The scandal relation to Enron resulted in wide ranging legal reforms that improved Corporate Governance. The most significant of these being the Sarbanes Oxley Act. The rights of shareholders need to be taken more seriously as they are based upon adequate Corporate Governance models being enforced by the Board of Directors.  “Sarbanes Oxley is necessary law designed to keep public companies honest with their financial reporting. No longer can dishonest corporate executives or fiscal managers load their books with false or misleading financial information.” (Sarbanes Oxley, 2010).

Works Cited

Berenbeim, R. E. (2002). Enron ethics breakdown. Executive Action, 1-6.

Sarbanes Oxley. (2010). Sarbanes Oxley: A Brief Overview. Retrieved 8 31, 2010, from Sarbanes Oxley: http://www.sarbanesoxleybasics.com/