The Enron case is becoming a classic fraud case; perhaps worthy of the indictments and judgments by the courts of law, the legislative discipline of Congress and the fears of the conservative sector of the business community. The Enron ripple effect continue to haunt even the most jaded observers on both sides of Wall Street. Five years into the Enron fiasco, hard nuggets of wisdom appear. Hypes and myths about corporate bigwigs were busted and business philosophy checked for substance over form.
The scandal now does not just bespeak of Enron but every corporate board room malevolence done behind closed doors. Motives behind decisions imply machinations of stakeholder interests on both sides of the balance sheet. Off-balance sheet derivatives items consummate creative Accounting. Even with tight corporate control, management remains weak and beholden to their egos. Thus, when officials talks about company performance, interest groups must avoid speeches factored into shareholder values.
Management would entitle themselves to stock options against paper profits. Even good decision-makers are not guarantees of good governance and transparency. Management oversight leads to override. The scandal then warns of a whistleblower who is always a climactic part of corporate fraud: reasons, ethics and greed as well. Accounting principles and practices became the most visible Enron casualties, with all its framework actually abetting the scandal. Who would question Arthur Andersen’s depth, being the world’s top audit firm?
Here, bigness appears to provide an imprimatur for wrongful acts and synonymous to being right. It is at this point that professional ethics escape the minds of both. Preventing similar cases in the future and winning back the trust of the investing public will be difficult, but not impossible. The Sarbanes & Oxley Act plugged the holes to avoid recurring malpractices. Good governance guidelines under the oversight board are good start. Investor vigilance is good and inculcating strong corporate values may resolve dilemmas.Disclosures are now mandatory and the SEC and PCAOB will make sure it is done.
List of References
International Swaps and Derivatives Association, (2002). Enron: Corporate Failure, Market Success, 17th General Meeting, Berlin, http://www. isda. org/whatsnew/pdf/EnronFinal4121. pdf (accessed May 6, 2008). Shaw, John C. 2003. Corporate Governance & Risk: A Systems Approach, 61-82, John Wiley & Sons, New Jersey. http://turnbull. sk. tsukuba. ac. jp/Teach/IntroSES/enron. html (Accessed May 7, 2008)