Business Law & Ethics: Enron Corporation Scandal

This document discusses the Enron Corporation scandal in the context of ethical corporate governance and the Sabane-Oxley Act, 2002. It explores the problems faced by stakeholders when law and ethical values are not considered. The document emphasizes the importance of business law and ethics in maintaining a balance between economic and social aspects.

Business Law & Ethics (Project 2)

Table of Contents
INTRODUCTION...........................................................................................................................................3
PROJECT 2....................................................................................................................................................3
By the reference of Enron Corporation, discussion should be done in context of ethical corporate
governance and Sabane-Oxley Act, 2002................................................................................................3
CONCLUSION...............................................................................................................................................6
REFERENCES................................................................................................................................................6

INTRODUCTION
It is explained that whenever any of the organization performs their business activity,
they should be aware that what are those business activities that can conduct and what should not
be done Second project will explain that what are the problems that business and its stakeholder
has to face if law and ethical values are not considered by focusing on Enron Corporations
Scandal.
PROJECT 2
By the reference of Enron Corporation, discussion should be done in context of ethical corporate
governance and Sabane-Oxley Act, 2002.
Case Scenario: The case of Enron Corporation has become so much popular because of
the scandal that has been found in this particular case. The fraud was of total $74 billion which
means that there were number of investors in this particular case who has the suffer because at
the end of the matter company was declared as bankrupt. In addition to this, there were number
of issues in the case which were found and all of them were problematic in nature such as
employees of the company has to lose their job and even their pension fund was used by the
company which means they have to also suffer from the problem. There were number of other
issues in the case which were found such as investor money was not returned and false
accounting statements had been presented in the case which has given confidence to each of the
investor to invest their capital within the company (Barber, 2016). The audit reports were also
presenting the false information where head of the company i.e., one-time chief had given his
permission. Looking at the circumstances, the chief of the company was punished the sentence of
24 years and even different types of monetary penalties were also imposed.
Ethical Corporate Governance: Corporate Governance explains about the rules
procedure and the laws that are needed to be considered. At the same time, law and rules should
be also followed in the ethical manner which means that in any of the circumstances company
should not make any of those decision due to which person connected with it has to suffer.
Talking about the concept in detail, it is one of the wider concepts which is followed by each of
the organization (McGowan and Buttrick, 2015). Here, company needs to ensure that they are
able to maintain balance between economic and social aspects. Both of this aspect’s emphasis on

the performing business activity in the manner that do not affect any of the person. In addition, it
is essential to review the effect of every decision that are being taken by the organization because
it will allow to ensure that whether taken decision will create issue for any of the stakeholders or
not. In simple words, ethical corporate governance guides to perform business activity in friendly
manner that do not arises problem for any of the other person just for their personal benefit.
Sabane-Oxley Act, 2002: The act which has been enforced to ban any of the illegal
business activity due to which stakeholder has to suffer is known as Sabane-Oxley Act, 2002. As
per the guidelines of the law and regulations, it is essential that business should not present any
of the false information. The reason of incorporating this respective law is reduce the corporate
fraudulent activity which are increasing at a rapid speed in current scenario. The act provides the
guidelines that how any of the corporate governance responsibility should be fulfilled. Even
responsibility of each of the person performing any of the activity has been explained which
means that proper guidelines should be followed so that any of the person do not suffers from it.
Overall, the probability of taking decision of own for any of the organization reduced
significantly because of the act.
Discussion of the case from the context of Ethical Corporate Governance
Ethical Corporate Governance is quite effective for business organization because it is
explained that how any of the business should perform their work. In other words, ethical
corporate governance is equally important for Enron Corporation but they failed to perform their
part of work. It is because company was creating number of problems for the stakeholders who
were connected with the organization and secondly (Tsalikis and Fritzsche, 2013). The decision
that were being taken by organization are completed against the ethical terms and values due to
which investors and employees of the company has to suffer from huge losses. As per the law
and regulations of Corporate governance, company should present the fair data as a part of their
responsibility but management of Enron Corporation accepted that false information from their
audit team and same information were provided to stakeholder. The main reason behind this
whole scandal was their personal benefit as they do not even though about their employees and
investors as they are the one who needs to suffer mainly in this case. The senior management
always needs to check the information and activity that are being performed within the
organization because that is one of the way through which any of the scandal can be identified.

The overall impact upon Enron Corporation was negative because it was not allowing them to
perform their business activity as per the requirement due to which debt upon the company was
increasing day by day and at the end it was categorized under bankrupt.
Discussion of the case from the context of Sabane-Oxley Act, 2002.
It is among the law which was commenced just after the huge scandal of Enron
Corporation. It means that the act automatically has the connection with Sabane-Oxley Act. As
per this particular act, it is found that company was preparing the false accounting statement and
presenting them in front of their investor (Ghahramani, 2015). The act always prohibits this type
of activity but still Enron Corporation had performed them. As per the Sabane-Oxley Act, it is
essential for any of the accountant to present the true information where audit of those
accounting information should be done on a regular basis. It is needed because it will be helpful
in identify any of the mistakes that has been performed in the business activity. This was one of
the major problems which was being seen within the case of Enron Corporation because they
were not conducting any of the audit as per the required manner which didn’t allowed to adjust
the situation. In addition, roles and responsibility has increased significantly as per this act as
they will be responsibility for reviewing each of the activity for the final time within the
organization. In simple words, it will be important for the company like Enron Corporation and
their management to check each of the detail for number of times because it is the only way
through which targets can be accomplished. Overall, this law states that company was at huge
default and the main reason behind it was just to hide the effect of debts from which company
was suffering from long time period.
The commencement of the law has resulted into positive side because it will not allow
any of the organization to conduct any of such activity that can create any of the problem for the
investors. Secondly, it has been seen that the business which has been performing its business
activity will not get any of the opportunity to present fraudulent data for the investor to increase
the overall capital in the business ((Hoffman, Frederick and Schwartz, 2014). It means that
chances of occurrence of similar form of fraud will reduce significantly and any of the person
who has been performing business activity will not get the chance to perform business in
unethical manner.

CONCLUSION
Business law have huge importance but at the same time, all of the business should
perform their business activity as per ethical corporate governance and Sabane-Oxley Act, 2002.
It is essential to understand that whenever any of the entity performs its business activity they
should be aware that their decision are not trouble making for other as simply mistake can create
problem for them but penalty can be imposed upon the organization at the same time.
REFERENCES
Barber, C., 2016. Healthcare law and ethics, 1: a general introduction. British Journal of
Healthcare Assistants, 10(2), pp.84-87.
McGowan, R. J. and Buttrick, H. G., 2015. Moral Responsibility and Legal Liability, or, Ethics
Drives the Law. Journal of Learning in Higher Education, 11(2), pp.9-13.
Tsalikis, J. and Fritzsche, D. J., 2013. Business ethics: A literature review with a focus on
marketing ethics. In Citation Classics from the Journal of Business Ethics (pp. 337-
404). Springer, Dordrecht.
Ghahramani, S., 2015. Professors as Corporate Fiduciaries: Implications for Law, Organizational
Ethics, and Public Policy. Va. L. & Bus. Rev., 10, p.237.
Hoffman, W. M., Frederick, R. E. and Schwartz, M. S. eds., 2014. Business ethics: Readings and
cases in corporate morality. John Wiley & Sons.