Analyzing Enron's Ethical Failures and the Sarbanes-Oxley Act

This report examines the Enron case, a major corporate scandal involving accounting fraud and ethical breaches. The introduction sets the context of business law and ethics, emphasizing the importance of ethical corporate governance. The main body delves into the Enron case, detailing the company's rise and fall, highlighting aggressive trading practices, mark-to-market accounting, and the subsequent bankruptcy. It discusses the case in relation to ethical corporate governance principles and the Sarbanes-Oxley Act of 2002 (SOX), which was enacted in response to the Enron scandal. The report explores corporate governance, the SOX Act, its provisions, and its impact on corporate responsibility, accounting regulations, and investor protection. The conclusion summarizes the key findings, emphasizing the crucial role of business law and ethics in maintaining organizational sustainability and preventing future corporate malfeasance. The report references academic sources to support its analysis.

Business Law and Ethics

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Discuss this case in relation to ethical corporate governance and the Sabane-Oxley Act of
2002. ...........................................................................................................................................4
CONCLUSION................................................................................................................................6
REFRENCES...................................................................................................................................7

INTRODUCTION
The business law are the practices which are acceptable by the various market participant
such as states, individual and other collaborative organization for the common good and healthy
competition so as not to distort the forces existing into business environment. The business laws
have impact on various dimensions geographically, economically and socially which need to
governed by set of principles which are codified into texts known as law. Business law
constructively develop the relationship among various participants so that they can co exist
together and adopt good practices. And ethics are the moral obligation associated with the laws
which need to be followed for the overall growth of market into correct direction without
following ones own benefit. Ethics teaches about collective responsibility of professional
businessman which can be helpful in having check and balance of unethical practices prevailing
into the market so that they can be corrected instantly. Ethics are inherited principles and
doctrines which shows pathway and guide towards prosperity of society where the business is
existing.
MAIN BODY
Case Scenario: Enron was established by the merger of two companies by Houstan
Natural Gas Corporation and Inter-north Inc., the company were name as HNG Inter-north, after
some time it was renamed as Enron. In the beginning the company was the monopoly power into
the natural gas sector and having its presence across the United States. After deregulation of laws
on supply of natural gas, the new market participant entered in competition with Enron which
diversified the market approach of Enron into various sectors, Enron had started marking its
presence in derivative market of freight, Electricity, Water, Coal, Paper and steel. Enron emerged
as intermediary into securities market and sold derivative contracts to its clients for fees, it acted
provided a platform to its clients to trade their contract via their channel. After coming with
Energy derivative contracts into securities market, Enron have resorted to aggressive trading
practices which did not followed the compliance rule with respect to the necessary norm for
establishing their clientele requirement and expanded their market without following good
practices which were essential for long rum business. And to support its practices it have
recruited some quality MBA graduates to make good business with respect to its adopted
practices, these candidates have acted into monopolistic market and relaxed it with competition

forces by expanding their business. They have developed quick closing cash generating trade
system which made the transaction easy and faster for their clients. In 1900, it played its role as
market creator, and willing to make trading platform for the available commodity, for those who
wants to start business. An online trading division was established as Enron Online, invested in
building the broadband Telecommunication Network which enable company executive to have
resort to adopt malpractices in trading which led to its downfall. The Enron was following mark
to market accounting practices which lead to show that assets are being shown up into balance
sheet as on market value rather than at fair value. It also shown the profits of the company as
future projections, which shown that the market price of shares are well and good.
In this U.S Security and Exchange Commission did investigation and rivals Huston
Competitor Dynegy that has been offered for making purchase of organization at low rate. The
deal has been failed to be conducted. Then case has been filed for bankruptcy under code of
United states bankruptcy code. As Enron has been holding sixty three points and four billion
assets which made it one of the biggest scandal of bankruptcy.
Under this case Arthur Anderson was guilty over making destroying important
documents. It has to be proven to be one of the most important view point over investigation that
was done by SEC. Till the time Supreme Court of US an organization has lost majority of
customers base which makes operations to be ceased. Enron employee and shareholders has
received limited return in lawsuits, despite of losing billion the pension over stock prices
(Pulapa, 2020).
As this scandal various loop holes were analysed which lead over amending of new act
that is SOX Act 2002. The act has been proven to be very helpful in making an organization to
be protected against fraud.
Discuss this case in relation to ethical corporate governance and the Sabane-Oxley Act of 2002.
Corporate governance: These are considered to be those rules and regulations which is
related towards actions which makes activities of corporate business to be controlled. Also
protecting of interest shareholders, senior management executive, customers, supplier, finance
over government and community. Government has been focused in providing framework which
provides stability over making discipline to be developed. Since corporate governance has been
come into existence after focusing over corporate culture. Such kind of process has been helping

in developing of corporate culture which makes focus over plaining action and making internal
control to be performed with corporate discloser.
Understanding Corporate Governance
Such governance has been making existence over setting rules, controlling, policies and
resolution which has been formed over governance in order to make corporate behaviour to be
conducted. It has been helping in making advice important and implication functioning of
shareholders in possible way. Good corporate governance has been making promotion through
validation that makes opportunities in participating market. Communication with corporate
governance is one of the major components which investor to again trust within an organization.
Sarbanes-Oxley Act of 2002: This act has been passed by US Congress on 30th July in
order to deal with frauds that makes reporting of corporation possible. This cat as deal with
frauds which makes reporting of corporation possible. Also it deals over fraud and finances that
makes corporate fraud to be reduced. The act has formed over introducing rules and regulations
which has been imposed in corporate culture. It has been formed for to introduce positiveness in
corporate culture by protecting interest of shareholders. Further more strong relationship is build
with investors by increasing trust and confidence within them. Major aim of the act is to build
good and easy ways which helps in controlling of frauds with more efficiency and effectiveness.
Then this act has motivated employees for making trust and asking them to be more concentrated
over trust to be build (Nguyen, 2018).
Understanding the Sarbanes-Oxley (SOX) Act
Rules that has been formed for enforcing of policies is dealing over outlining various
provisions which makes amendment over supplement possible. Law that has been existing over
dealing with amendment and supplement. Such laws has been brought into existence due to
failure of earlier existence that deals as per regulations. Also this Act promotes working of
Security Exchange Commission and various principals has been defined that has to be followed
has been explained as follows:
 Corporate responsibility
 Increased criminal punishment
 Accounting regulation
 New protections

Saebanes-Oxly Act 2002 is considered to be one of the most lengthy and complexed kind
of legislation. Certain provisions are there which makes act to be more concrete which has been
developed in the act. Furthere sections has been explained as follows:
Section 302 of the SOX Act of 2002
Under the section corporate officer is being given certification in writing under the
organization through financial statement disclosed over requirement that has been made over
aspects in financial issues. The officer is being given responsibility of financial statement over
inaccurate subject which makes penalties to be charged on him.
Section 802 of the SOX Act of 2002
This contains rules that has been affecting record keeping and first deal with destruction
and facilitation of records. Second strictly defines retention form period of storing records. Then
comes third rule that is there to be given for specific business with organization to include
electronic communication (Barth and et. al., 2020).
Corporate governance has been related over acting in a way that deals with lot of
functions required to be followed by management which makes promotion of clean governance
possible in an organization. If it would have been followed in proper manner then management
would have been done over various process in better an effective manner. As SOX Act has been
formed after various fraud has been committed and its role is to control activities in maintaining
confidence of investors. The act would have been formed then the case would have been
investigated with more efficiency that would have made solving of case with appropriate
punishment.
CONCLUSION
From the above report it can be concluded that business law and ethics has an important
role to be played within an organization this has made formalities to be established. These laws
deal with workplace environment. Further in the file Corporate governance has been covered
with SOX ACT 2002. Both are very important from view point of making a organization gain
sustainability within its working. Corporate governance has been helping an organization to deal
with various problems related to an management of organization that helps in creating of
disciplined and order within it. The SOX ACT 2002 was formed to deal with frauds existing at
corporate level this act majorly deal with investigation of such crimes and imposing of strict
punishment over them.

REFRENCES
Books and Journals
Barth, J.R and et. al., 2020. Cryptocurrency valuation and ethics: a text analytic
approach. Journal of Management Analytics. 7(3). pp.367-388.
Nguyen, J., 2018. Key Trends in Healthcare Law and Ethics. Legal and Ethical Issues for Health
Professions E-Book. p.162.
Pulapa, S.R., 2020. Business Ethics: An Introduction. In Business Ethics and The Bhagavad
Gita (pp. 1-14). Springer, Cham.
Sewu, P.L.S., 2019. Good Faith as a Key Principle of Business Ethics to Franchise Agreement
and Development in Indonesia. Journal of Legal, Ethical and Regulatory Issues. 22(1).
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Tinker, T., Sy, A. and Saxe, E., 2016. Professionalism and professionalisation ethics in business
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Treder, M., 2020. Data Ethics and Compliance. In The Chief Data Officer Management
Handbook (pp. 287-297). Apress, Berkeley, CA.