Enron Scandal Essay

In the event of all these processes the firm misled its investors and customers as it did not showed its creditors as liabilities. Moreover, the company continued to convert the investors’ and customers’ cash into its shares thereby facing the risk of losing its investors including customers. All these meant that Enron Company had lost its reputation within the American society and it was under liquidity crisis. In 2001, Enron was discovered to be bankrupt due to losses from its speculative trading on the highly risky electricity market, which has been disguised as profit through manipulation of the accounts of the firm. According to Johnson (2003), among the obvious reasons of the cause of this scandal was regulatory and legal structure failure. If a more sensible compensation system may have been enough for Enron to turn into a brighter path.

Second, a better communication system within the organization could have eased the situation Lagace Martha (2008). Due to internal poor communication protocols the scandal situation went from bad to worse. Due to poor internal communication, the executives within Enron exploited this loophole and hide their misdeed for long enough. However, if a better and transparent internal communication could have mean that every sector could have been better-governed in a more transparent manner. The Enron’s scandal could have been avoided if the board oversight could have been strengthened, perverse financial incentives could have been avoided and if ethical disciplined throughout the organization could have been instilled. Moreover, the directors of public companies can also adapt private-equity governance aspect so that they can accomplish oversight responsibilities.