Corporate Scandals: How Greed Consumed the American Dream

1995 Words Dec 6th, 2005 8 Pages
Corporate Scandals: How Greed Consumed the American Dream Enron is not even at the top of the list. More and more corporate scandals are happening in America. Why have these scandals just shown up in recent years? What causes these corporations to lie and be deceitful towards investors? Though once seen as legitimate, fair, honest, and respectable, corporations have arrived at a stage of greed and deception. This can be explained by a number of factors such as the how the stock market works, the stock market boom, the stock market flourishing, changing company practices, new CEO benefits, and specific company examples. Public companies are any company that has stock available to the public to buy. A company that wishes to set up a new …show more content…
This increase in options allowed CEO's to buy large amounts of stock for dirt cheap. Almost all of this was due to option programs that made relatively poor use of market information and were poorly designed. This rise in compensation more than doubled throughout the 90's providing the American people with greedy CEO's that just wanted more, no matter what the cost. Enron, though not the largest scandal, could be one of the most talked about and blown up by the media. Enron was caused by a couple of reasons, though the main underlying factor behind these is a conflict of interest that has evolved in our companies. First, I think that one of the obvious causes of the Enron scandal is our legal and regulatory structure (Reid). Current laws and SEC regulations allow firms like Arthur Andersen (Enron auditor) to provide consulting services to a company and then turn around and provide the audited report about the financial results of these consulting activities (Sorkin). This is an obvious conflict of interest that is built into our legal structure and must be addressed. Second, a private company like Enron currently hires and pays its own auditors. This again is a conflict of interest built into our legal system because the auditor has an incentive not to issue an unfavorable report on the company that is paying him or her. Third, most large companies like Enron are allowed to manage their own employee pension funds. Again, this is a conflict of interest built into our
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