Review of Accounting Ethics: Enron Corporation

Review of Accounting Ethics: Enron Corporation

Introduction

With the advent of globalization, global business environment was created which further prompted inclination of the corporate business environment towards adopting liberalization policy, so as to cope with the demands of shifting businesses and changing demographics more effectively. Although having some obvious advantages, this step raised critical issues pertaining to the business ethics. Now, business ethics scenario in global business environment attracts numerous research scholars contributing in the relevant domains, to indulge them in constructive arguments in order to rectify the problems and critical issues.

Discussion

Ethical breaches in recent times involving some larger and reputable corporations as Enron, WorldCom, Tyco etcetera significantly scarred public trust in corporate executives in addition to the accountants and lawyers who invariably advised and served their clients in attempts to save and help them in fooling the public out of their money. This lack of trust is complimented by increased societal demand indicating that corporations and their representatives are entrusted with moral obligation to not inflict any harm upon public. If damage happens to the public, not only will the organization be responsible but its agents will have to be accountable, for they are being placed as the immediate managers.

In addition to these dominant changes in the business environment, regulatory environment has been established so as to ensure against any possible frauds and ethical violations. Lack of regulatory environment effectively facilitated ethical breeches in recent times where officers could legally claim of ignorance, thereby easily eschewing responsibility of corporate ethical violation. This environment, thus effectively promoted immorality, non-transparency and responsibility avoidance. This leeway at the top management further resulted in employees refraining from speaking the truth for the fear of getting fired or being subjected of boss retaliation, which could ruin their career. Thus lack of regulatory environment led to the implantation of opaque, rather than transparent culture which subsequently led the corporation towards ethical and financial crises, and later towards legal crises. This culture, however is attempted to be reverted back to its transparent mode by the current regulatory environment, by examining inner workings of the corporation more thoroughly and more vigilantly.

In the post-Enron era, actions were taken by the Congress in addition to Securities and Exchange Commission (SEC) along with United States Sentencing Commission; being the regulatory bodies, indicating that directors and officers running publicly held companies are not legally permissible to claim ignorance in case of fraud or ethical breech. This is considered as dramatic shift where law started to codify elements of ethical leadership, indicating penalization for those who choose to thwart law.

Furthermore, employees are now provided safety when they act as whistle blower and make public the malpractices their organizations are involved in. the current environment promotes legal compliance by rewarding compliant organizations. This manifests in the provision which indicates that if any firm self-reports any ethical breech to Justice Department, they are most likely to get their financial penalty substantially reduced or even ...