enron scandal that leads prosperity in Corporate Governance

The advancements of integrated circuit mean information technology allows unfettered limits to capital market of United States.  In year2000 everything was at high peak in USA. In capital market of USA one company is growing rapidly called “Enron Corporation”.

A company with high investment portfolio, A company was hope for common stockholders, A company growing  its share vale rapidly, A company providing multiple services, A company with employs more than 40000, A company 5^th largest in USA, A company founded in 1992, based us Huston, A company who bear largest bankruptcy of time.

In the company key focused was to boost up stock price of company every employ was promoted and rewarded on this base,  the greed was legalized in Enron corporation, an employ named Fastow who was chief financial officer of the company start manipulating financial statements of company, contingent revenues on the basis of contracts was added in balance sheet to show attractive earning as his statement on an interview with CNBC

Today, Fastow says while his transactions followed the rules and were approved by auditors—"I thought I was being clever"—he now realizes he was missing the point of the rules.

"I should have asked myself, 'Did I intentionally mislead?'"

Fastow, 52, insists he lives every day with the pain he caused, and while he completed his sentence in 2011, he still carries his prison ID card with him as a reminder.

But he says corporate executives are still falling into the same trap he did, concentrating on the letter and not the spirit of the rules. In fact, he says fraud today is "ten times worse" than it was in the Enron era.

"Transactions today make me blush," he said, "and I was the CFO of Enron."

What were the current pitfalls of Enron?

1.      No standard reporting

2.      Break of clarity

3.      Little involvement of stockholders

4.      Biased decisions

5.      Deviation from core objectives

6.      Unfettered use of Greed is allowed in Enron

Can you suggest something which could have been done to avoid, what happen with Enron?

As suggested in Sarbanes- Oxley bill  

1.      Audit independence

2.      Corporate responsibility

3.      Enhanced financial disclosures

4.      Analyst conflicts of interest commission resources and authority

5.      White collar crime penalty enhancement

Can you list some of the new corporate governance polices designed after Enron scandal?

  

  

As U.S.A sec stars his investigation against company many conflict of interests were found in auditing standards as well as accounting limitations, market value to market vale accounting was one resins as many were found in scandal, In fact law down foundation of improved legislation in capital market. The senate banking committee of U.S by conducting 10 meetings in 1.5 months by consulting refined professionals of market they identify that manipulations of accountants, objectivity of auditors, weak corporate practices, conflict of interest, disclosure issues, and lower control of sec were become bases of new legislation.        

 After this case U.S capital learn new way of artificially created value system that produce problems only, and introduce new legislation to carry on interest and confidence of investors on capital market.

This issue results in loss billions of dollars and around 40000 jobs, and trillions of dollar in market value of the company. The philosophy of unfettered greed will not be continuing in most of companies.     

This scandal allows companies worldwide to re think about their governance models and law down foundations for improved ways corporate governance many things had been enshroud but still many things need to address to open new chapters of empowered corporate governance model in limited as well as private limited companies.