Enron

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Law

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Georgia Institute of Technology

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Conflict Management

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Question 1

In 2001, Enron, a company that dealt with energy and the seventh-largest organization in

the US, collapsed and failed to operate. Employees, investors, and the general public were amazed

to find that the giant company had failed. The dominant company with incomes over $100 billion

had collapsed and became the largest bankruptcy in few months. The bankruptcy had been brought

by the winding up of various subsidiary companies of Enron. Blame for the collapse of Enron was

placed on its board of directors and the entire management as they did not raise the alarm when

they noted that the fortunes of the company were dwindling (Prymostka, 2018). They were blamed

for getting into partnership with other companies knowing very well that the company was on the

verge of collapsing.

Organizations' leaders need to ensure that their company has a high moral value, principles,

and conduct to work in freedom in those organizations. Unethical businesses make employees feel

insecure and lower their morale, and therefore the production in such organizations falls short of

achieving what they are meant to achieve. Leaders should set high standards of morals and good

conduct for their business. A business sets its standard by dealing with employees, customers,

other industries, and their business practices. The management of a company needs to focus on

business ethics as an integral part of their corporation to ensure that the customers are happy with

the services delivered.

If Sarbanes-Oxley were in place in 1995, Anderson would have managed to salvage the

company from collapsing. The Act would have dealt with this financial crime and fraud in the

company, and there would be no fraud. Enron used to hide its debt, and in the new Act, it is criminal

for a company to hide its debt in another company and release inaccurate information on your

stock trading. Arthur Andersen was Enron's finance officer, and he oversaw the firm's accounts

during this transition. Despite Enron's poor ratings and incorrect accounting practices, Andersen

gave it a stamp of approval and signed off the corporates reports over the years. Although Andersen

had a good reputation for high moral obligation and quality risk management, Enron's scandal

touched on his character and greatly spoiled his reputation. Andersen, the company's auditor since

1985, had failed to give a clear report of the company.

Criminal charges were opened, and Andersen was held responsible for obstructing justice,

although he appealed. The conviction was overturned later, and a group of partners bought that

name in the year 2014 and created a firm known as Andersen Global (Zaman, 2019). After Enron's

scandal, new regulations were put in place, and legislation was done to promote public companies'

reasonable financial reporting accuracy. Sarbanes-Oxley Act heightened the consequences for

altering, fabricating, or destroying financial statements and for attempting to defraud shareholders.

Increased regulation and laid-down procedures have been put in place to prevent collapsing

of corporate organizations, which has helped prevent collapse like that of the Enron magnitude.

Sarbanes-Oxley was enacted in 2002, and it is a bill that helps major corporate and accounting

organizations to report their ratings without creating scandals. The bill was enacted to react to

major corporates reporting bankruptcy and destroying evidence of their financial standing in the

stock market. The bill's sections cover the corporation's responsibility, the responsibility of the

management, and the board of directors. It spells out criminal responsibility for misconduct. It also

bestows power to the security and exchange commission to come up with regulations to define

how public organizations should comply with the law.

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1 Conflict Management Student’s name Instructor’s name Course Date 2 Question 1 In 2001, Enron, a company that dealt with energy and the seventh-largest organization in the US, collapsed and failed to operate. Employees, investors, and the general public were amazed to find that the giant company had failed. The dominant company with incomes over $100 billion had collapsed and became the largest bankruptcy in few months. The bankruptcy had been brought by the winding up of various subsidiary companies of Enron. Blame for the collapse of Enron was placed on its board of directors and the entire management as they did not raise the alarm when they noted that the fortunes of the company were dwindling (Prymostka, 2018). They were blamed for getting into partnership with other companies knowing very well that the company was on the verge of collapsing. Organizations' leaders need to ensure that their company has a high moral value, principles, and conduct to work in freedom in those organizations. Unethical businesses make employees feel insecure and lower their morale, and therefore the production in such organizations falls short of achieving what they are meant to achieve. ...
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Tags: company management Business Environment Enron Company Financial Crime Andersen global