Enron Corporation
Meredith Ferguson
Professor Mathew Miko
Business Law
February 02, 2011

“Our corporate society depends upon a system of checks and balances to keep corporate greed from running amuck. These checks and balances involve a multitude of participants, many of whom act as gatekeepers who have the responsibility of protecting corporate shareholders, corporate creditors, and investors. If the gatekeepers act properly, the shareholders, creditors, and investors can be protected”(David S. Ruder).

  1. How could Enron have been structured differently to avoid such activities?
Enron could have avoided their difficulties by eliminating “conflict of interest”.
  1. The firm of Arthur Anderson provided consulting services and then turned around and provided the report of the financial outcome of those same consulting services.
  2. Enron hired and paid their own auditors creating a conflict of interest as the auditor had an inducement not to issue an adverse report on the company that is paying the bills.
The Sarbanes-Oxley Act of 2002 addresses corporate governance by requiring the SEC(Securities Exchange Commission) to cause the stock exchanges and Nasdaq to prohibit the listing of any security of an issuer that is not in compliance with standards for audit committees set forth in the Act. The Act requires the SEC, by rule, to prohibit the listing of securities of any company not in compliance with standards established in the legislation, including the following:
  * The audit committee is given direct responsibility for appointment, compensation and oversight of the work of any accounting firm employed by the issuer.
  * Each member of the audit committee must be independent, and in order to be independent may not accept any consulting, advisory, or other compensatory fees from the issuer and may not be an affiliate of the issuer.
  * Each audit committee must establish procedures for receiving complaints about accounting and auditing...