• Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint

Preventing Another Enron

In the aftermath of the Enron scandal a debate is underway in American financial and political circles over how to strengthen the nation's regulations to prevent another such occurrence. President Bush has advanced proposals, as have the Democrats; and the elements of the Financial Value Chain have entered with their suggestions. Much needs to be done, and in addition to more detailed suggestions made in this chapter, additional legislation or regulation should include the following:

  1. Placing more direct liability on corporate executives—in part outside of directors' and officers' liability insurance—when investors are misled by corporate financial accounting;

  2. Revising accounting standards to increase transparency to investors, especially with respect to

    1. Conflicts of interest for corporate executives, their bankers, and accountants,

    2. Off-balance sheet financing, and

    3. Recognition (that is, counting) of nontraditional revenue;

  3. Regulating accounting firm practices, including especially separating consulting from accounting services;

  4. Permitting 401(k) and other defined contribution pension plans to

    1. Provide expert financial advice to participants,

    2. Require reasonable diversification in investment portfolios of participants,

    3. Prevent trading freezes that are unreasonable in terms of timing or length of time, and

    4. Provide for outside directors on the administrative boards of large plans.



Not a subscriber?

Start A Free Trial

  • Creative Edge
  • Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint