Post Enron Era

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  • Topic: Corporate governance, Corporation, Enron
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Post-Enron Era
By: Brenda Palmer

Management 320
Week 8

The post-Enron era has brought on many new changes in the way businesses are to conduct

business and to keep in line with the laws and not to fall into the Enron mistakes and mistrust. Before

Enron, many people including employees, stakeholders, shareholders, board of directors and people in

the communities had high trust in corporations and didn’t for see any corruption. Either it was blatant

what ethical issues and laws were being misused and/or broken or they were good at keeping a low

profile of deception. Millions and billions of money has been lost and stolen from the shareholders. It is

important to entrust some kind of post-Enron policy that will ensure that this can’t and won’t happen in

any business again. Trust is a very important factor in business and in order to instill this in the post-

Enron era we have to look at a number of different factors that play a key role in building proper

business ethics from employees, shareholders, board of directors and all the way up to the CEO. “The

scandal demonstrates the need for significant reforms in accounting and corporate governance in the

United states, as well as for a close look at the ethical quality of the culture of business generally and of

business corporations in the United States.”[i] First let’s take a look at the reasons for Enron’s collapse

before we focus on ways to improve the business ethics policy. There was the conflict of interest and

lack of attention from the board of directors of Enron. “The board of directors was not attentive to the

nature of the off-books entities created by Enron, nor to their own obligations to monitor those entities

one they were approved.”[ii] The other alarming issue was that the board of directors didn’t protect the

shareholder or the employees. Somehow they didn’t see this as their responsibility. After Enron every

company is on a “skittish market”[iii] so whatever can be done to turn around the pitfalls of the businesses

is the goal. “The fallout from Enron has focused attention on a heap of accounting issues from the way

company’s book revenues and compute earnings to the way they account for losses and the information they provide shareholders and sent many companies scrambling to remove any possible doubts, real or

imagined, about their own practices.”[iv] What can companies do to win back investors trust? There have

been very many policies enacted to protect the integrity of the business for all involved as well as the

consumers, but more needs to be done in order to improve things for the well being of the country.

“Most publicly-held United States companies lack the basic foundations of an enterprise-wide

sustainability program, including a clear mission statement, a dedicated functional department, and a

system to assess whether sustainability activities help financial performance.”[v] Board of directors

“almost never use additional sources (including peer-company benchmarks, environmental reports,

director education programs, and consultants) that would help them critically verify and analyze any

internally produced information on these matters.”[vi] “A report found that 61.9 percent of surveyed

companies do not use any metrics to link executive pay and accomplishments in the social or

environmental sphere.”[vii]

“The sudden collapse of Enron Corporation in late 2001, amid revelations that its public

accounting statements had been manipulated and falsified to conceal the company’s true financial

position, was the first in a series of major accounting scandals involving American corporations. The

response of the 107th Congress was to pass the Sarbanes-Oxley Act (P.L. 107-204), sometimes described

as the most sweeping amendments to the securities laws...
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