Enron Fraud Scandal and Ethical Corporate Governance

INDIVIDUAL REPORT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Ethics can be defined as kind of moral principles that helps in governing behaviour o a
person or a group for conducing an activity (Dibra, 2016). Ethics plays a vital role in business as
it helps in developing appropriate business practises and policies which further helps in avoiding
any kind of significant legal and financial issues, maintain positive brand image such it can
benefit everyone involved within the organization. This essay will lay emphasis upon
relationship of Enron Fraud Scandal with ethical corporate governance and Sarbanes-Oxley Act
of 2002.
MAIN BODY
Overview of Enron’s fraud Scandal
Enron Scandal was an accounting scandal of Enron Corporation which was an energy
company based in Houston, this company led to bankruptcy in 2001. When investigation was
done and report was generated it was identified that financial condition of Enron was sustained
by a systematic, institutionalised and creative planned accounting fraud (Eckhaus and Sheaffer,
2018). Executives of Enron hid debt and losses from their investors using different kinds of
questionable accounting practises in order to meet wall street expectations. Due to this fraud,
Enron corporation began to crumble, share prices fell drastically and at least company filed for
bankruptcy.
Ethical corporate governance
Corporate governance plays a vital role in financial sector. In fact, it is one of the most
essential part of a company. It helps in facilitating effective entrepreneurial management as it
helps in delivering long term success to the organization. It is the central and the dynamic part of
a business. Its main role is in functional direction rather than in control of management. Weak
corporate governance or unethical practises in corporate governance can impact an organization
in a negative manner. Ethical corporate governance can help in preventing failure of an
organization. Board of directors of a company are majorly responsible for setting ethical
corporate governance within an organization (Kabeyi, 2019). It is one of the major parts of legal
system of a country. Ethical corporate governance hep in bringing improvement within
accountability and transparency within the organization. Ethics and corporate governance are
interrelated to each other. Ethical corporate governance helps a company in controlling power
and responsibilities of managers and top management. It helps in identifying whether decision
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