"The Ethics and Legality of Financial Regulation: What Enron Revealed"

Abstract

The Enron scandal of the early 2000s is perhaps the most publicized occurrence of corporate fraud in recent decades, and it had impactful consequences: not only did the company's scandal and resulting prosecution lead to the dissolution of Enron Corporation and the sentencing of several C-level executives, it also sparked a major reform in financial regulation by way of the Sarbanes-Oxley Act of 2002. The Enron collapse and its legislative fallout raise questions about how effectively financial regulation addresses ethical concerns in the marketplace. This analysis will explore these questions through the application of Aristotelian virtue ethics, deontological ethics, and the contractarianism approach to ethical egoism. While no single methodology provides a clear solution to addressing corporate fraud, these theories help shed light on the design and success of current regulatory responses. Analysis will center on one particular piece of legal legislature that received significant press attention during Enron's criminal investigation. 18 U. S. Code Section 1346 states that it is a felony to "deprive another of honest services," and it was according to this definition that former Enron CEO Jeffry Skilling was found guilty of fraud (Casey, 2010, p. 1). Analysis of this "honest services clause," ethical systems in corporate environments, and post-Enron legal regulation reveals that while increasing punishments for noncomplying entities may seem like an appropriate way to deter corporate fraud, it cannot fully address the concerns of market shareholders and stakeholders.