Failure of Ethical Corporate Governance: Enron Scandal and Sarbane-Oxley Act 2002

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BUSINESS LAW AND
ETHICS

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Table of Contents
INTRODUCTION...........................................................................................................................3
PROJECT 2......................................................................................................................................3
Introduction to the Case..............................................................................................................3
Facts of Enron Scandal................................................................................................................3
Ethical Corporate Governance and Overview of Sarbane-Oxley Act 2002...............................4
Relationship Between Ethical Corporate Governance and Sabrane-Oxley Act 2002................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

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INTRODUCTION
Success of a business is dependent upon various factors. One of the factor upon which the
success of the business will be based is business ethics which all the business organisations
should follow. It is a fact that the main aim of formation of any business is gaining profit but the
people who are running the business for profit motive must ensure that activities through which
they are receiving profit must be ethical in nature. If an organisation will follow the ethics while
doing business it will create positive impact in the eyes of the general public and due to this the
brand value of business will improve. Doing business by following the ethics will ensure that the
brand image of the company get improved in the eyes of the general public. The business has to
follow various laws and regulations also passed by the legislature in order to ensure the smooth
functioning of business. In the second part of this project the researcher will examine that how
Enron Scandal has contributed in failure of Ethical Corporate Governance due to which a
new legislation Sabane-Oxley Act 2002 was passed.
MAIN BODY
PROJECT 2
Introduction to the Case
This report will talk about the failure of ethical corporate governance in the Enron which
is popularly known as Enron Scandal. In this scandal it was disclosed that the accounts of
Enron were mismanaged and there were many irregularities in those financial accounts of the
company which lead to the failure of ethical corporate governance in Enron. As this scandal was
disclosed in the year 2001, one act was passed to prevent these types of corporate governance
failure namely Sarbane-Oxley Act in the year 2002. This act was passed for the purpose so that
these types of fraud can be prevented in the future because these types of scandals leads in losing
trust of the investors towards the market. If the investors will lose the interest in market, they
will invest less money and due to which the economy will get badly affected(Gunning, 2017).
Facts of Enron Scandal
The Enron Corporation was founded in the year 1985 after two companies got merged in
United States of America. From the year 1996 it has got the title as “America's Most
Innovative Company” till 2001 because it was shown through its financial statements that the