Video: Corporate responsibility
This video is a fascinating look back to 2002 at Capitol Hill in the US, when the Corporate Accountability Act was debated at the Senate Commerce Committee, with a look at Enron and associated companies which brought corporate responsibility and accounting ‘scandals’ into a new light.
Speaking on the debate and why ethics and responsibility are essential in corporate America, Senator Byron Dorgan, the Consumer Affairs Subcommittee Chairman remarked:
This is about public trust: the mechanism by which we accumulate capital in this country is such that people must be able to trust those who are running our companies, those who are preparing financial statements, those who are running accounting firms, those who are running our law firms - and yet the faith in those institutions has been sorely shaken in recent months.
The USA’s Corporate and Auditing Accountability and Responsibility Act, also known as the Sarbanes-Oxley Act of 2002, was enacted to protect investors by improving corporate disclosures and certifying financial statements.
Major scandals involving Enron, Tyco International, Adelphia, Peregrine Systems and Worldcom resulted in billions of investors’ dollars being lost when the companies collapsed and rocked the securities market.
Arthur Andersen LLP was one of the Big Five, before it became the Big Four, and lost their position (and their CPA licenses) when the key staff members in the US were pressured into turning a blind eye to Enron's unethical audit and accounting practices.
Criminal charges were even brought against staff members due to their involvement in hiding billions of dollars worth of losses; these were eventually overturned, but the damage to reputation had already been made.
Enron's share prices dropped from $90.75 to 67 cents following their bankruptcy and the company eventually folded.