Introduction
The chosen article is “Enron: Who’s Accountable” by Daniel Kedlac. Initially, Enron Creditors Recovery Corporation was an American company for energy. It is known as one of the most successful company for electricity, natural gas, pulp and paper, as well as communication companies in the world. It is also hailed as the America’s Most Innovative Company. But unfortunately, due to its bankruptcy in the late 2001, it appeared that the reported financial condition was maintained substantially by a systematic accounting fraud and because of that it was referred to as the Enron Scandal (Fusaro and Miller, 2002).
The article is about the so-called scandal about the finances of Enron during the late 2001 and the related issues about political aspects. After a sequence of evidences about the inconsistent accounting procedures with regard to the fraud that have been responsible all throughout the 1990s comprising Enron and Arthur Andersen’s accounting firm, Enron held on the threshold of undergoing the biggest bankruptcy history. This happened specifically on the mid of 2001.
As the scandal flaunted, the shares of Enron basically descended from over US$90.00 to pennies. It had been taken account a blues chip stock, so therefore this was an unparalleled and tragic scenario in the world of finances. Enron’s thrust existed after it was revealed that much of its revenue and profits were actually the outcome of deals with exceptional purpose entities such as limited partnerships that it controlled (Healy and Palepu, 2003). Thus, a lot of Enron’s debts and losses that it gone through was not reported in its financial statements. The bankruptcy was filed on the 2nd of December, 2001. And the scandal resulted to the dissolution of Arthur Andersen accounting firm which was at that time said to be one of the top accounting firm worldwide. Upon founding that the firm was guilty of obstruction of justice in 2002 for obliterating the necessary documents to Enron audit and worst they were forced to stop auditing public companies. Although the conviction was thrown out in 2005 by the Supreme Court, the damage to the Andersen name has not permitted it from recurring as a feasible business (Fusaro and Miller, 2002).
Days before in 2001, it was known that the management of Enron had been looking for new investment and trying to develop a new market. Their efforts were reported to have been failed. Big investors were actually approached for an attempt to make a profit but they were declined. According to sources, Enron was planning to give details about its business practices and procedures more fully in the next days with a lot of confidence but still they were afraid that they would not be able to find an investor who is willing to help them out because of the scandal that happened to them. After the reception of a wide continuum rejection, the management consequently found a help with the board of Dynegy which is an energy trader like them. Dynegy accepted Enron’s business and offered to help them with some grounds (Oppel, 2001). Thus, they confirmed their deal with Enron in 2001.
Undoubtedly, a lot of comments were received by Enron and Dynegy specifically on the cultural aspect and considered the personality of the Chief Executive of Dynegy, Charles Watson. Some commentators wondered if the troubles of Enron had not simply been the outcome of an above suspicion accounting error. With Dynegy, some things were revealed from Enron and a lot feared that other mistakes might get into the scene as well. Thus, Dynegy CEO assured the investors that the real nature of the business of Enron had been made some clarifications. He stated that Enron’s energy trading is worth the price that they are throwing up for the business (MacLean and Elkind, 2003).
Discussion
The case of Enron relatively delineates the basic principles of Global transformations with regard to the business works worldwide. Generalizing, standardizing and innovations on the worldwide interconnections in all areas of the contemporary social life such as cultural issues to criminal, financial to spiritual aspects should be empirically viewed. Cultural issues in the case of Enron greatly involved the Dynegy upon buying the offer of Enron. Criminal aspects, though it was not really a crime because there were no firm evidences of committing the fraudulent things, included the so called fraud with the accounting firm of Arthur Andersen and hence scopes the financial aspects of the whole business as well as the economic perspectives of Enron’s performance resulting to a maximal loss.
The meaning of globalization largely differs for various kinds of people’s perspectives towards a certain issue. Basically, the term started to be viable in the academic writing during the 1960s and by the late 1980s where it established itself firmly in an accepted discussion. By the 1990s, the term was in danger of appearing to be the line of our era which is the major idea signifies everything from global financial markets up to the Internet but of course delivering a negligible substantive outlook into the modern human conditions. Still, the term globalization portrays a bunch of processes which is distantly too significant to neglect for anyone who is looking for a comprehension of the world and the way it works linking both the past and present times (Mizruchi, 2004).
The trends focus about social and environmental politics which has something to do with the whole conceptualization of the case. Major principles should first be considered and empirically observe such as; the ideas about the global market that centres to the new historical era in which global capitalism determines the state and other traditional kinds of social organization, the underlying principle that covers a large regionalization and spontaneous dominance of a few powerful states, and the historically extraordinary globalization that can be viewed in several areas. These areas include the state and global politics, finance, authority and power, culture, military affairs and environmental issues. A critical fine distinction among these areas is evaluated in visualizing the changes to power and politics in the social arena of Enron Company.
There were several arguments that played an important role in evaluating the case of Enron. Arguments with regard to the discrepancies that aroused between the business and economy attributes the total system of global transformations in today’s era. It was stated in the article that CEO of Enron Kenneth lay have had connections with bush and other political officials. Hence, the business is largely connected with the economy and Enron’s loss therefore initiates a loss for the whole economy as well. Though it depicts that particular idea, Lay’s appeal for help from the government was neglected by the officials. That merely describes the association of power and politics. Being a large company’s CEO, so much power was given to him and for that reason, big connections with politics arises. This is not new though but still a lot of considerations should then further be reviewed. The political implications of the Global transformations do not differ just as simply as with the concentration of those transactions in and of themselves but more specific as well with the concentration of the associations between governments and societies (Mizruchi, 2004). That implies a conflict in both politics and political analysis between the fundamental mobility of Enron and the capacity of control of the states in relation to it. Indeed, the conflict between the relationships of the business leaders largely affects their acquaintances with the government officials. Another idea is that a liberal kind of democracy and privileges does not amount a lot if the form of electoral aid unsuccessfully produce the substance of policies with the provisions of the electorate and says that it wants a weakness where in an advanced society looked to be more and more vulnerable under the pressures and struggles of globalization. Sometimes those people who are in authority to do so or those who got a larger power manipulates the economic and social arena. Liberal thinking about the entities encompasses the independency and stronger link among its finances and other important areas. Power pursues the dependency of businesses into a certain area and that results to the associations of the major factors that comprise the society. The fraudulent actions that were committed by the company appeared to have a vague generalization because of the destruction of papers. It accounts for the mismanagement of a crucial case and therefore social injustice prevailed. Theories of social scientists commonly considered issues in the social arena as what the views of global transformations illustrate.
In addition to the grounds of globalization, they are systematically evaluated throughout the pre- modern, early modern and contemporary eras in terms of the extensity of global networks, intensity of global interactions, velocity of global flows and the impact propensity of global interconnectedness and other four areas which relates to the infrastructure of global networks, institutionalization of global networks and the exercise of power, the pattern of global stratification and the dominant modes of global interaction (Hicks, 2000).
Observing the facts about the political issues of Enron primarily relate with the society. As what the Enron Company stands in the government, they largely have impacts. Enron’s downfall contributed to the formation of a U.S. Sarbanes- Oxley Act or SOX which was signed into a law on the 30th of July, 2002. The power of Enron significantly affected the legal politics and importantly considered as a change to federal securities laws. Other countries also have accepted new corporate governance legislations. The law generally provides more and firm penalties for those who will commit fraud and among other things requests public companies to avoid making loans to management. Also, to share more information to the public and sustain a stronger independence from their auditors, accounts for the law. And the most critical thing is reporting and auditing the financial internal control proceedings. However, certain kinds of provisions in the legislation are still in review by the Congress (Healy and Palepu, 2003). Moreover, people negatively o Enron’s issue by their widespread anger over the crisis on power and the financial impact it brought on the state. They blamed this issue for the election of a new Governor as well.
The concept of this issue should then be able to scope the historical extraordinary globalization that can be viewed in several aspect such as the financial environment in which Andersen played an important role, the political environment in which the government officials are largely influential though in Enron’s case they did not appear to be biased and the power which significantly arouse in all areas of the case most especially in the role of the Enron’s past Chief Executive officer Kenneth Lay.
Conclusion
Enron’s case indeed depicts the relationship between power and politics which initially starts in power and eventually turns out to be related with politics. As what the theorists stated, understanding of globalization may mean differently for different people. Dominance of people in society attributes to the whole conceptualization of the economy and some large business has a great impact on the society. It somehow determines the social status of an economy just like what the Enron Scandal brought to the state. Although in due course, it was not completely prevailed that it committed in to a fraudulent action, but still, actions such as destroying the necessary documents for the investigation of the case and to fully come up with a reliable result.
Corporate power should be separated from the governance of the state and hold its democratic power. Ownership and control are two different issues that have to be addressed in the work of businesses world wide in connection with the people who are in power and authority (Mizruchi, 2004). Separating the perspectives of power from political analysation should be given an emphasis as well.
References
Fusaro, P.C & Miller, M. (2002). “What Went Wrong at Enron: Everyone’s Guide to the Largest Bankruptcy in U.S. History” (Wiley).
Healy, P.M & Palepu, K.G. (2003). “The fall of Enron” The Journal Of Economic Perspectives, Vol. 17, No. 2, pp. 3-26.
Hicks, A. (2000) “Global Tranformations: Politics, Economics and Culture” by David held, Anthony McGrew, David Goldbatt and Jonathan Perraton (a review). Stanford University Press, 1999.
MacLean, B. & Elkind, P. (2003). Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron.
Mizruchi, M. S. (2004). “Berle and Means Revisited: The Governance and Power of Large U.S. Corporations”. Theory and Society, Vol. 33, No. 5, pp. 579-617.
Oppel, R. A., Jr. (2001). “Trying to restore confidence in Enron to salvage a merger. (with Dynegy).” The New York Times, col. 2.