Through an organizational culture that focused on financial greed for self, illegal accounting practices, conflicts of interest partnerships, illegal business dealings, fraud, negligence, and massive corruption at all levels, the Enron scandal help to create new laws and regulations with stiff penalties if violated (Ferrell, et al, 2013). The federal government implemented the Sarbanes Oxley Act (SOX) (Ferrell, et al, 2013).
The company concealed huge debts off its balance sheet, which resulted in overstating earnings. Due to an understatement of debts, the company was considered bankrupt in 2001. Shareholders lost $74 billion and a lot of jobs were lost because of the bankruptcy. The share prices of Enron started falling in 2000 and in 2001 the company revealed a huge loss. Even after all this, the company’s executives told the investors that the stock was just undervalued and they wanted their investors to keep on investing. The investors lost trust in the company as stock prices decreased, which led the company to file bankruptcy in December 2001. This shows how a lack of transparency in reporting of financial statements leads to the destruction of a company. This all happened under the watchful eye of an auditor, Arthur Andersen. After this scandal, the Sarbanes-Oxley Act was changed to keep into account the role of the auditors and how they can help in preventing such
The Enron scandal, considered one of the most notorious accounts of fraud and company bankruptcy in the history of the United States, was one of a small handful of rare business and stock controversies that caused drastic changes in law, marketing, and business systems within America. The executives and shareholders of the company lost millions of dollars in debt, while employees of the company were denied pension benefits, a necessity for future retirement plans. (“The Enron Collapse: A Look Back”)
The Stock Market Crash marked a major turning point in the history of the United States. For decades the U.S. was the world’s leading superpower, but after the crash the country cascaded into the worlds most harsh depression. This crash was caused by a series of problems in the U.S. including, the over production of goods, unequal distribution of wealth and poor regulation of the stock market itself. Many can argue that the crash of 1929, strengthened the nation, allowing for policies such as roosevelt's first new deal, second new deal, the glass steagall banking act, and new regulations in the stock market, and for big business (Blumenthal, Karen). However, what can’t be argued is how the crash sparked a panic as companies, peoples, and the nation sank into the great depression.
The rise of Enron took ten years, and the fall only took twenty days. Enron’s fall cost its investors $35,948,344,993.501, and forced the government to intervene by passing the Sarbanes-Oxley Act (SOX) 2 in 2002. SOX was put in place as a safeguard against fraud by making executives personally responsible for any fraudulent activity, as well as making audits and financial checks more frequent and rigorous. As a result, SOX allows investors to feel more at ease, knowing that it is highly unlikely something like the Enron scandal will occur again. SOX is a protective act that is greatly beneficial to corporate America and to its investors.
Catanach Jr., A.H., & Ketz, J.E. (2012). ENRON Ten Years Later: Lessons to Remember. CPA Journal, 82(5), 16-23.
The Enron Corporation is notorious among accounting scandals and university case studies. At its time, Enron was a staple of a Fortune 500 company, and was perhaps most importantly, any investor’s dream. The company had originally entered the energy industry via a merger between Horthern Natural Gas Company and Houston Natural Gas, and eventually became one of the world’s largest electricity firms; they even went so far as to branch into communications, paper and pulp, natural gas, and other products that seem both unusual and even counterproductive to their business model. Their success was such that that in February 2001, Enron was listed as number one for “innovativeness” and No. 2 for “quality of management,” by Fortune Magazine (Sunseri
 NY Times, “Enron’s collapse: The overview; Enron Auditor Raises Specter of Crime”, Dec 2001.
The end of 2001 and the start of 2002 saw the end of a period of magnified share prices and booming businesses. All speculations of misrepresentation came to light and those firms which once seem unconquerable were now filing for bankruptcy. Within this essay, I shall discuss the corporate governance mechanisms and failures which led to the Enron scandal resulting in global corporate governance reforms being encouraged.
On the surface, the motives behind decisions and events leading to Enron’s downfall appear simple enough: individual and collective greed born in an atmosphere of market euphoria and corporate arrogance. Hardly anyone—the company, its employees, analysts or individual investors—wanted to believe the company was too good to be true. So, for a while, hardly anyone did. Many kept on buying the stock, the corporate mantra and the dream. In the meantime, the company made many high-risk deals, some of which were outside the company’s typical asset risk control process. Many went sour in the early months of 2001 as Enron’s stock price and debt rating imploded because of loss of investor and creditor trust. Methods the company used to disclose its complicated financial dealings were all wrong and downright deceptive. The company’s lack of accuracy in reporting its financial affairs, followed by financial restatements disclosing billions of dollars of omitted liabilities and losses, contributed to its downfall. The whole affair happened under the watchful eye of Arthur Andersen LLP, which kept a whole floor of auditors assigned at Enron year-round.
Enron was a Houston based energy, commodities and services company. When people hear the name Enron they automatically associate their name with one of the biggest accounting and ethical scandals known to date. The documentary, “Enron: The Smartest Guys in the Room,” provides an in depth examination of Enron and the Enron scandal. The film does a wonderful job of depicting the downfall of Enron and how the corporate culture and ethics were key to Enron’s fall. As the movie suggests, Enron is “not a story about numbers, it is a story about people.”
Enron, the US Energy Trading and Utilities Company grows in just 15 years into one of America’s largest and most successful Corporations. Enron’s officials ignored warnings of accounting irregularities, as they pocketed millions of dollars in stock market gains. When the company collapsed, they declared bankruptcy and thousands of people are thrown out of work. The investors, including most of Enron’s employees lose billions, as Enron’s shares sink to penny stock levels. The top executives walk away with millions in profit until the government comes calling.
Having proper supervision and financial regulation is key to prevent a financial crisis, such as the one that took place from 2007-2009, from happening. In order to understand the role financial regulation and supervision played in causing this crisis, one must look at the events that lead up to it. This essay will briefly examine the events in the US economy leading up to and during the crisis in order to establish the weakness in regulation and supervision.