Business Law Enron/WorldCom Essay

1. IntroductionThe goal of a large number of venomous acts is to obtain as loads as profit for the individual or group that carries out the act. Just like bribery or robbery, accounting frame scandals that shock telecommunications industry within the past two years, in some(prenominal) case watch similar intention that is to make notes to benefit a soul or a group of people through illegal acts age disguising their illegal origin.Concerning the accounting scandals in Enron, in this piece of music, we will elaborate the base of Enron and World Com scandals discussing how the keep come withs event relates to bankruptcy, insurance, and/or employment law.2. invoice ScandalsEnron, Global-Crossing, and WorldCom recent cases have baffle a history in pay and telecommunication beas. The history tells us how fragile the monitoring process of the familiaritys fiscal system is. The situation leads to accountancy scandals that hurt assignors, employees, and the industries.I n more reports on Houston Chronicle, we can conclude that the case of Enron emerged as the troupe and its auditor cooked up the books to show bogus profits. This is done so to cajole the public so that they are interested to invest their currency during the unions initial public offering (IPO). Previously, the company has already performed utilisation of commodity prices in order to obtain huge profits cod to unregulated energy derivative market.Moreover, the bankers also join this bogey as they have been giving loans and would like to reduce their risk hoping that Enron would obtain much money from IPO so that Enron can fulfill their obligation to the bank.Therefore, in this accountancy scandals there are at least three actors the commencement is Enron, the company that has a pile of debt that was off balance sheet. The second actors are auditors they acted as consultants that helped the Enron to write a fake figure of the companys profit in the book. The third actors are ba nkers that issued good analyst reports for Enron financial proceeding and acted as underwriter.By doing so, Enron can raise much money to pay their loans to banks and back to the evil business when Enron run out of money again. Amazingly, within three years, the fake report gives Enron over $10 one million million of investors money. The illegal action like cases of MicroStrategy and Xerox has caused the declining public trust on stock markets and auditors (AFL-CIO, 2007 Turner, 2002).3. Bankruptcy and InsuranceThe case of Enron, WorldCom and other accounting scandals hitherto leave public with many questions regarding the way the companies try to recover from the scandals oddly when it comes to fair manipulation for the hurt employees.The term fair refers to equal treatment for CEO and their players. Remember the shocking Enron case a some months agone that many of people fail to recognize what went wrong at Enron, an energy-trading titan and once the seventh-largest compan y in U.S.The lawsuits and official investigations on Enron show that the bankruptcy has sent more than 6,100 of Enron employees into unemployment. In addition, it also causes serious fault at workers health care and retirement savingsfor many, their life savingsbecause worker 401(k) plans were halted while the company stock price tumbled (AFL-CIO, 2007).Although the companys performance went bankrupt, however, the Enrons executive still obtain bonus checks for more than $55 million, in addition to $50 million in bonuses just weeks earlier. The Enrons case is one example of increasing pay gap amongst CEOs and workers (AFL-CIO, 2007).Moreover, she also points out that the Project 911 turned out to give many benefits for Enrons management instead of giving benefits for workers. In the Project 911, Enron was to pay the companys executives $105 million worth of bonuses prior to the companys bankruptcy filing in December 2001 (Steffy, 2005).However, according to the impertinent bankrupt cy law, which President Bush signed in April, a company might give their executives excessive compensation in the form of retentiveness bonuses unless if they have another(prenominal) job offer. It means that under impertinently law, executives will not be paid to stay until they show demonstration they intend to leave (Steffy, 2005)The new law had driven the bankruptcy flirt to approve $38.2 million in additional retention bonuses in 2002 and another $29 million in 2003. The situation soon raises critics since the come with an inbuilt paradox. At the management level, the company took questioned decision to reward the very few people who drove the company into collapse. In other words, Enron was enticing a failed management to stay (Steffy, 2005).This situation refers to moral crisis since the company was paying watchfulness to bonuses for the companys executives instead of taking care of their employees. Although the case of Enron has mother symbol of wrong model of corpor ate America, few observers expect it to become a lasting symbol (Ivanovich, 2002).In short, the first thing American companies should do is providing variable compensation scheme in which employees benefits will join on as the companies benefits increase as well. Therefore, employees will fee fairly tempered and in turn increase their motivation.4. Employment LawThe cases on Enron and WorldCom salute new atmosphere regarding the employment law since it moves tin whistle blower, a mortal who disclose the scandals. Since whistle blowing leads to disallow impact for the blower, it is imperative that any individual that intends to whistle blowing to do it effectively. Sherron Watkins, the individual who discloses the scandals at Enron, is one example of whistle blower.In addition, whistle- blowing also greatly affects the executives of a company who are wedded information from an employee. In order to protect the whistle blower, Sarbanes-Oxley Act figure out there should be no discrimination against employees who disclose the mistake in a company (Hails, n.d.).Amidst the fierce situation at Enron, congress is still busy passing new laws in response to the up-to-the-minute news about corporate misdeeds. In detail, this is really not the best(p) solution to the problem of corporate fraud at Enron.Considering that whistle blowing leads to negative impact for the blower as it progresss at Enron case, it is imperative that any person that intends to whistle blowing to do it effectively. Below is guideline that helps an employee to determine whether a situation merits whistle blowinga) Magnitude of consequencesA person intends to conduct whistle blowing care the impact of a action that he consider as wrongdoing. If only one person will be harmed by an action, it does not accost for any whistle blowing action (England, 2007)b) Probability of effectThe person mustiness(prenominal) be sure that a wrongdoing happens or will happen that requires for whist le blowing. If he is not sure about the situation, he had break off not perform whistle blowing (England, 2007)c) Temporal immediacyThe person must think the urgency to whistle blowing. If he considers it is urgent to prevent greater losses, he can conduct whistle blowing immediately (England, 2007)In addition, lots of accounting scandals incidences have driven NYSE to issue new guidelines mean to enhance the accountability and integrity and of NYSE-listed companies by strengthening the corporate brass section and disclosure practices of those companies. Harvey Pitt, SEC chairperson, the person behind the birth of the guidelines, asks NYSE to round off its corporate governance listing standards.Based on the facts, since most scandals involve insider, therefore senior managers should personally liable for criminal charges and damages. Concerning this issue, congress also has passed the Sarbanes Corporate Accountability Bill that one of its main provisions includes the fact that th e chief executive officer and chief financial officer immediately have to sign off on a companys financial records and may assume criminal liability if they are wrong. chthonic such circumstances, in the event that such scandals exist, investors and employees should not bear the province for their own actions. This is because in this developed economy, people from all over the cosmea have been willing to invest in pieces of paper because of a canonic trust that there are systems in place to make the pieces of paper valuable. Therefore, it is the governments responsibility to maintain people trust to invest in a piece of paper by providing an oversight system that works to protect the investor.Learning from these events, it is governments responsibility to repair standards, controls and accountabilities. While companies should improve their employees moral in order to prevent any financial scandals in the future. This is imperative since most business schools lack of pietism in their curriculum.