Ten years on, the Enron Corp. scandal looks like a cakewalk.
We’ve been through a 2008 mortgage-inspired global financial shock from which we’ve yet to fully recover. And in that still-fragile economic state we stare at the baleful and not fully imagined implications of the raging European sovereign debt crisis.
Still, anniversaries are important. They lend perspective. Friday, Dec. 2, marks the 10th anniversary of the Chapter 11 filing of Enron, the once high-flying, new-fangled energy company that was an investor favorite.
The collapse of Enron in the wake of massive accounting fraud was symbolic of an era that also saw major bookkeeping-related shenanigans at U.S. corporate giants Worldcom and Tyco International.
A still-debated law was ushered through in the scandals’ wake. Like the divisive Dodd-Frank law that reset financial regulation in the aftermath of the 2008 financial crisis, the 2002 Sarbanes-Oxley law still can raise blood pressure among opponents who see it as symbolic of heavy handed regulation.
But SarbOx, as it came to be known, did what it aimed to achieve. Accounting among U.S. corporations is more accountable than it was when the likes of Enron had their day in the sun.
Critics bristle at a couple of sentences that require internal audits of a host of financial practices at large public companies, but somehow the companies survived the burden.
Corporate boards of directors got more power, but the regulatory response was seen at least in part provoked by widespread board ineffectiveness.
And the Occupy Wall Street crowd and others would probably harrumph at the perceived lack of individual accountability after the 2008 financial meltdown, compared with stiff jail sentences received by top corporate officers of Enron, Worldcom and Tyco.
“This law says to every dishonest corporate leader: you’ll be exposed and punished. The era of low standards and false profits is over. No board room in America is above or beyond the law.”
That populist cry was uttered by none other than the then President of the United States, George W. Bush. The Republican wasn’t usually known as an anti-capitalist firebrand. He said it at his signing of SarbOx on July 30, 2002.
Lessons learned 10 years later were pretty evident even at the time. There were the duped Enron employees who put most of their 401K savings in the stock of their employer. Don’t. No matter how much you love your company, diversify your 401K.
A couple of others from Nov. 30, 2001: One money manager paraphrased Warren Buffett explaining to Dow Jones Newswires why he stayed away from Enron stock. Don’t invest in things you don’t understand.
And that other sturdy bromide: If something seems to be too good to be true, it is.
read more: Olympus Wealth Management
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