When considering whether or not to invest money, many Americans have become hesitant. Shock waves of the Enron, Tyco, and WorldCom scandals can still be felt more than ten years later. As Americans witnessed the loss of thousands of dollars by Enron investors and employees, they became timid about investing their life savings not knowing if they too would receive nothing in return. With the knowledge of how a decline in Financial Marketing would greatly affect the U. S. economy, Congress eagerly began pursuing ways to reinforce America’s faith in investing their hard earned money. Government officials wanted to more accountability for a company’s principal officers, a line of separation between the company and its auditing firm, and defined punishments for non-compliance. The U.S. Congress passed the Sarbanes-Oxley Act of 2002 with the anticipation of restoring America’s confidence in investing.
The fall of Enron
Enron was a large corporation that marketed natural gas and electricity in North America. The once corporate giant, which was headquartered in Houston, Texas, was listed on Fortune’s “Most Innovative” in the United States for several years and was ranked #7 on the Fortune 500 list in 2000 (Frontain). The company had reported earnings of $100 million dollars in the year 2000 and was believed to be worth billions in the stock market exchange (Lehrer). As company officials of Enron used secret investments and fraudulent mathematics to increase the company’s value, the company’s stock prices drastically increased. Company insiders who were aware of the inflated stock prices quickly sold their stocks while prices were high. However In 2000, the company hit rock bottom. PBS.org reports that “When word got out that Enron was not as successful as it claimed the value of the company fell. Thousands of investors were left holding worthless stock, and many lost their life savings” (Lehrer).
In 2001 Enron became the first company in the history of the United States to file for bankruptcy (Sridharan, Dickes and Caines). The Enron Corporation, which was once known as the world’s largest energy company, had now become notorious for scandal, greed, and corporate corruption. Enron employees, who were urged to invest in the company by corporate officials and later restricted from selling the stock, lost their jobs as well as most of their retirement savings (Sridharan, Dickes and Caines). Along with Enron, the company’s auditing firm Arthur Andersen was implicated in the scandal accused of auditing malpractices. The corporate corruption of Enron witnessed by Americans left many dishearten in the abuse of reporting and trust of investors.
Creating a cure for the disheartened
Feeling America’s demand of reliability and trustworthiness in investments, U.S. Congress passed the Sarbanes-Oxley Act of 2002. Drafted by U.S. Senator Paul Sarbanes and U.S. Representative Michael Oxley, this United States federal law concentrated on setting new...