Responsibility

Abstract

Initially the Enron scandal was about a lack of clarity and accuracy in the financial statements on the organization. Investigations looked at the activities of the company as a whole, and its officers were deemed part of this. As the investigation moved forward, more and more emphasis was placed on the roles and responsibilities of the company’s senior executives. The investigators found that although the company was at fault, with apparent systemic weaknesses in transparency, it was the specific personal misdeeds of individuals in positions which gave them power and control over the resources of the organization that were doing the most damage. From this has developed a sharp focus within the Sarbanes-Oxley Act on specific roles within the organization, notable the CEO, the chief financial officer (CFO), and others whose roles approximate to these functions. The novelty in this legislation is its insistence on the culpability of these individuals and the responsibility they bear for a publicly listed company. This responsibility translates, in the worst case, to heavy fines and long periods of imprisonment. Here, if ever there was, are instances of incentive to ensure the compliance process works. To spell out this incentive, if it can be called such, is the purpose of much of the Act.