Last Updated 08 May 2020

The Enron scandal

Category Enron
Essay type Research
Words 724 (2 pages)
Views 362

The Enron scandal is known to have caused a stir after the way funds were misappropriated. The managers of Enron took advantage of its standing so that they could come up with false activities and claim funds for corporate social responsibility. This implies that most of the time, funds would be drawn from the company coffers so as to fund fake or non-existent social responsibility activities. A thorough scrutiny at company policy shows that the goals of a company should not deviate much from its original goal of attaining the best services in its field of operation.

According to Enron’s standing as at the time of the scandal, it had successfully managed to achieve the goal of sufficiently providing its core services. Therefore, in fleecing the company of its money, the management had managed to go against the core goals by deviating funds. Consequently, this is a sign that the regulations regarding corporate policy might not be watertight as is shown in the way Enron’s management managed to go around the regulations.

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In comparison to the Enron scandal, the economic crisis passes for a much less organized scandal. This is due to the fact that the crisis mainly involved banking and other financial institutions lending out money without considering their financial status. This means that the crisis might have mainly been about the misdiagnosis of a situation that could be avoided had some pragmatic steps been taken. On the other hand, the Enron scandal indicates a systematically planned pilfering of company funds to satisfy the management.

This in itself is fraudulent and a good example of abuse of office. Otherwise, the Enron scandal and the economic crisis of 2008 both indicate how poor management and lack of fore-sight can be of detriment to any economy. Both the financial crisis and the Enron scandal expose how sensitive regulation of an industry is. This simply goes a long way in showing that management should include a team of experts who can be used to do analysis on the effects of financial mismanagement. Practices like insider trading were used in both cases.

While most management teams in financial institutions used it in their firms during the economic crisis, the team at Enron did it so much so that the Enron stock was affected (Radcliffe, 2010). Government regulations that would have ensured that these events are prevented include those that regulate capacities of financial institutions to lend out money. This implies that financial institutions would only be limited in lending their monies in sectors that are secure. The financial institutions would have been forced to present some form of statement showing their financial “health” in regulated periods.

This is healthy so as to monitor and know when it is safe to lend out money and to which sectors. On the other hand, government regulations to check scandals such as the Enron scandal would include having the stock and securities of the firm checked frequently. This implies that the practices such as insider trading should have been checked by ensuring that the management involved register at the Security Exchange Commission of the US. This commission would also have to regulate the amount of stock that can be traded in such circumstances.

Unionization of the workforce in such circumstances would be very important as the impact of such events would not hit them drastically. This means that the workers would have some form of organization that would try and mitigate the situation so that they do not suffer very much. In essence, their rights would be taken care of without involving their using personal resources to get justice. Such unions, on the other hand, cannot be involved in corporate and economic decision making of private firms. This might not be true for the economy of a country as it is not privately run.

Therefore, the unions might not have the power to influence decisions in private firms unless they, as a union, own a sizable amount of the company’s stock. The public economy is however open to such union for scrutiny and suggestions. This is due to the collective responsibility heaped upon citizens of a country together with key institutions in it to manage resources within. In conclusion, both the events had an effect on the general economy of the US. Reference Radcliffe, R. (2010). Poor Business Practices: Role of the corporate board in the Enron scandal. Helium.

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The Enron scandal. (2018, Sep 28). Retrieved from https://phdessay.com/the-enron-scandal/

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