Enron Leadership Enron Collapsed Research Paper

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[. . .] Since the bill passed with bipartisan support in both houses of Congress, and was overwhelmingly favorable to the oil, coal and nuclear industries, the Democrats and their allies were only able to obtain some concessions for they allies and interest groups (Sherman, 2009, p. 36).

Under a Republican administration and Congress, any type of energy policy bill is going to be overwhelmingly favorable to the oil, gas, nuclear and goal industries, which direct most of the campaign donations and lobbying efforts to that party. This is simply a matter of public record and not in dispute, although Democrats Senators from oil and coal states like Jay Rockefeller of West Virginia and Mary Landrieu of Louisiana will also fall in line behind the traditional energy industries. No Democratic administration has ever been able to eliminate the subsidies and tax breaks that regularly flow to this sector, or shift the focus of energy policy to greener alternative fuels and renewable energy. In 2009-11, the Obama administration attempted to do so and failed because enough Democrats joined with Republicans to block any such change in policy. At present, the U.S. still imports 58% of its oil and obtains most of its domestic electricity from coal-fired power plants, and the Energy Policy Act of 2005 showed exactly how effective the lobbying efforts by traditional energy companies could be in Congress (Sherman, pp. 37-38). Nothing in the bill was directed at improving the fuel efficiency of automobiles, for example, which would be the single best method known today for reducing oil consumption, while it subsidized offshore drilling and the construction of new coal and nuclear plants. In contrast to the giant oil, coal and nuclear industries, alternative energy companies spent only $3.8 million in federal campaign contributions in 2000-08, or just 1.5% of the total for the entire energy and national resource sector (Gevi and McNabb, p. 93). Given the realities about how Congress really functions, that relatively small amount of money buys them very little influence, and this is reflected in every energy bill that has ever passed.

Widespread Failures in Ethics and Corporate Social Responsibility

Enron has hardly been unique over the last decade, but rather seems to be one of many examples of massive corporate fraud, corruption and lack of social responsibility to employees, consumers, shareholders and the general public. BP presided over the worst oil spill in history, for example, while Tokyo Electric Power Corporation was responsible for one of the worst nuclear disasters in history, both of which also involved considerable deception of the public about the scale of the catastrophes. Fraud and corruption on Wall Street and the mortgage industry resulted in the worst financial meltdown in history, and WorldCom under the leadership of Bernie Ebbers collapsed in one of the worst corporate frauds in history. Over the last decade, public confidence in corporate leadership and the economic system in general has been badly shaken, and with good reason.

In contrast to all these blatant and obvious failures in social responsibility, Corporate Responsibility Magazine listed the Gap as one its 100 best corporate citizens in 2010, with a rank of ninth overall and the best in the retail category. This is based on factors like human rights, philanthropy, environment, employee relations and governance. Gap has been praised by the International Labor Rights Fund, Workers United, the Natural Resources Defense Council and Ethical Trading Initiatives for its ethical social, labor and environmental policies (Gap Social Responsibility Report 11). It sought to build links with unions and environmental organizations, governments, employees, unions and community investment funds. Gap developed new policies of social and environmental awareness designed to "appeal to its young and progressive clientele," or at least the type of customers it hoped to attract. Perhaps this helped improve its sales in a very difficult economic climate, which rose by 12% in 2010 (Malhortra 2010). In India, Gap received the Personal Advancements, Career Enhancement (PACE) award for improving the promotion and educational opportunities for women in the textile and garment industries. Gap also received the award for World's Most Ethical Company in the retail sector, and since 2008 (Malhortra 2010).

Gap has always tried to attract a young clientele and the use of child labor and slave labor in industry was highly damaging to its corporate image and brand names, so it responded with new policies of corporate social responsibility that examined its entire supply chain to eliminate the worst abuses. Gap does cancel contracts with manufacturers in the developing world that do not meet the standards of its Code of Conduct and now claims that it no longer employs child or sweatshop labor. This is still common in the developing world, with children as young as five being employed for very low pay to help prevent their families from starving. In 2008 there were over 260 million child laborers in the world, with at least half employed in dangerous conditions (Gap Social Responsibility Report: 34). Gap has a "zero tolerance" policy for child labor, and refused to work with the government of Uzbekistan when it organized children to harvest cotton (Gap Social Responsibility Report: 37). 60% of children in India worked and did not receive adequate educations, and in 2007, the Observer in the UK reported that children as young as ten had been sold into slavery in Indian textile and garment factories that made products for Gap. Gap cancelled contracts with 136 factories in 2006 because of violations of it Code of Conduct, including 42 in China and 31 in India. As of 2010, 22% of Gap's products were manufactured in China, but the company stated that it had no contracts with sweatshops since 2004 (Malhortra 2010).

Public Demands for Reform and Regulation: Sarbanes-Oxley and Dodd-Frank

In light of Enron's example and the more recent fraud and corruption among the large banks and investment houses, the main recommendation would be that the provisions of Sarbanes-Oxley and Dodd-Frank be enforced vigorously around the world. Companies that continually lie to public and investors and cover up their true financial condition should be driven out if business and their CEOs and CFOs should face criminal and civil prosecution. With Sarbanes-Oxley, few people really "thought that the tightening of the rules was a bad thing," although there were frequent complaints about the costs of compliance (Holt 2008). These stricter controls over accounting and auditing practices caused many corporations to delist from U.S. exchanges, yet foreign countries have also been passing their own versions of SOX since 2002 and regulations are certainly going to become even stricter and better enforced because of the recent financial meltdowns in Europe and the United States. In the future, laws and regulations like SOX and Dodd-Frank are going to be the international norm. SOX was correct in forcing CEOs and CFOs to sign all financial reports are certify them as true to the best of their knowledge, even though they may not be familiar with every detail of the transactions of large corporations. On principle, making the boards and the leading executives civilly and criminal liable for all false reporting should act as a deterrent to ethical and legal violations in the future, as long as the law is enforced.

Later in the decade, the exact same problems would occur again with the large Wall Street banks and investment firms that were marking 'assets' of dubious values like subprime mortgages. They also collapsed and ended up receiving trillions in dollars in bailouts from the Congress and the Federal Reserve, which was also yet another indication that Wall Street and corporate America had basically bought the government and both political parties. Enron had certainly done so with donations to politicians of both parties, and was especially close to both George Bush's, who helped the company obtain the deregulation it desired and billions in government subsidies. In the Internet age, white-collar crimes like those of Enron are becoming far more common since the companies find it easier to conceal bogus transactions, clients and traders using the new technologies. This was the type of white-collar crime that the Sarbanes-Oxley Act (SOX) of 2002 was designed to eliminate, while the Dodd-Frank Act was intended to prevent similar financial meltdowns from occurring again. Advancements in copying technology, instantaneous financial transactions and rampant corruption in the U.S. all facilitated the white-collar crime epidemic, and although banks are corporations frequently complain about the new regulations, they are here to stay and will be expanded to the global level in the future. This certainly should happen, although once again whether the news laws and regulations are going to be enforced from the outside or end up being internalized as part of corporate culture is another matter. A great deal of recent evidence indicates that this is simply not occurring in many large organizations, since ethics policies exist only on paper or as a public relations exercise rather than in actual day-to-day practice.

SOX did not prevent the… [END OF PREVIEW]

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