Essay Instructions: Enron
[1] After viewing the "Corporate Crackdown: Enron" video, please discuss your reactions.
Link to the video:
http://onlinemba.uww.edu/media/fnbslw341toboyek/modules/mod14b/index.htm
Was there anything that shocked or surprised you? How might you, if you were a lawmaker, address what should have happened from a regulatory standpoint?
Since Enron was some time ago, do you have an opinion on the success or failure of the implementation of the laws in response to Enron? Will there ever be an environment when business can be efficiently regulated and the public protected?
[2]After discussing your reactions, please RESPONSE to other FOUR classmates' post (at least 3 sentences).
-----classmates' post-------
<1> Ji Woo Choi Jul 26, 2011 11:17 PM
Enron scandal
Since I am an accounting major, I have heard and learned about the Enron scandal. This scandal was so significant that the United States Congress passed the Sarbanes-Oxley Act a year after the Enron scandal shocked the world and created doubt about public company accounting. When I first heard about this, I was very shocked that such a huge company would involve in accounting fraud, which would create doubt on the stock market and other forms of investments as a whole. If I were a lawmaker, I would have suggested to enact regulatory laws on public accounting before this massive disaster occurred. However, the United States Congress’s action in response to the Enron scandal was both responsive and appropriate.
I have learned in Accounting Systems course that the Sarbanes-Oxley was very successful and created the good and intricate accounting standard which the public companies must follow. In a near future, if not at this point, that there will be an environment when the business can be efficiently regulated and the investors protected. For example, in response to the Sarbanes-Oxley Act, XBRL (Extensible Business Reporting Language) was created. XBRL enables financial reporting both more timely and accurate. After Sarbanes-Oxley Act, I believe, the public accounting is already very transparent, which we can infer that it was successful.
<2> Diana Rakadzhieva Jul 27, 2011 8:32 PM
Reaction and SOX
It was interesting watching the video on the Enron scandal, and I enjoyed studying up on it some more. I had also learned about it in passing in various classes like accounting, but there always seems to be more to learn about it. My reaction was slightly shocked at all the people that were involved in so many different areas of the company. I was also surprised the founder died of a heart attack shortly, like two weeks I believe they said, after his sentence. It makes sense people feel justice was not served, but at the same time there is nothing you can do to change those circumstances. The other part of the video that caught my off guard was Jeffrey Skilling's speech. I could not believe when he said that he was sorry, but that he still did not think he did anything wrong! He onlyaided in several loopholes which hid massive debt and eventually led to the loss and bankruptcy of Enron.. crazy.
The Sarbanes-Oxley Act, which was put in place due to the Enron scandal and several other corporate and accounting mis-haps, has definitely been beneficial to the public. It provided a way for the public to trust companies again after losing so much money, and feeling misled with the Enron scandal especially. This act set in place rules and regulations that work to not mislead the public, keep accurate financial records, be more transparent with important financial information, and reduce fraud. It also created the Public Company Accounting Oversight Board for greater government oversight. Personally, I think this was a very important and beneficial act to establish for America. It lays down fundamental guidelines and rules that are fair and not overbearing. These are rules that companies SHOULD follow to begin with, but it works to ensure them so the public can have confidence and trust back after the scandals that broke out in the 2000s with businesses. It also provides a means of just punishment for those who do not comply and follow the regulations put in place.It has shown to be successful simply with the reduction of the amount of corporate business scandals SOX was established.
I feel this was a good way to combat the uneasiness and anger that ensued after the Enron scandal. However, I do no think there will ever be a way to stop these problems with businesses completely, especially with all the new technology and options available. I feel people constantly have new ways and ideas to try and come up with loopholes to the law and systems in place.
<3> Diana Rakadzhieva Jul 27, 2011 9:47 PM
John Skilling
I recently read that his son, John Skilling, was found dead in his dorm room. It was said that he commited suicide and I wonder if his dad being in jail had anything to do with it. When interviewed in jail in 2008, Jeffrey Skilling said that his son, John, had not come to see him in jail because he could not accept the fact that his dad was in jail. So, this makes me think that maybe the wrongdoings of his dad were one of the reasons for John's suicide. I am wondering whether Jeffrey Skilling is still thinking that what he did was not wrong?
<4> Derek Blackmore Jul 28, 2011 9:37 AM
Reaction
It wasn't shocking, but the inability for these people to personally admit their guilt, even after being found guilty in court, was disgusting. You would think that coming clean at that point would lesses the stress and pressure. I really have to thin that some of these people are sick, as in a medical condition of some sort. Pathological and psychological issues could explain a lot in terms of how they are able to place themselves above the law.
It seems like so long ago that this was in the news, but major legislation like SOX does not come about on a regular basis. If you use the decreased number of cases in the news since SOX was adopted, then it seems that it has been effective. I think that there will always be a certain number of executives that break the rules. They will, and probably already have, found other more sophisticated ways to work the system. CEO's are under a great deal of pressure already, and allocating resources to SOX compliance only makes their job more difficult. I actually think that scaling back CEO salaries would help to decrease the pressure on them. They obviously want to make the big bucks like anyone would, but with high salaries come high expectations that are sometimes unrealistic. They likely sometimes feel that cheating is the only way to perform at a level that justifies their existence and satisfies shareholders. Although the federal government has begun to discuss the issue of CEO compensation, I doubt that there is a way for them to completely solve the issue entirely.
