The Sarbanes Oxley Act Of 2002 - 1133 Words

As before, both companies stock prices went from bad, to worse – eventually becoming de-listed. In addition, both companies lost shareholder equity, reducing the value of the investment for the stakeholders. In WorldCom’s case, about 180 billion dollars was robbed from the pocket of the shareholder. While many people were directly affected by these scandals, many were indirectly affected as well due to the externalities caused by these greedy firms. The industry, for example, was to be untrusted. To try and instill trust back into customers, the Securities and Exchange Committee proposed and implemented a new law. This policy was put in place to regulate the accounting practices and to make them more honest. Titled the Sarbanes-Oxley Act†¦show more content†¦WorldCom, for example, was facing a downward trend in their industry. The telecommunications company was going south, especially thanks to text messaging and the internet. In addition, the government denied them the ability to merge with Sprint (a $129 billion dollar merger), which quickly halted their growth. WorldCom had built a growth strategy built upon mergers and acquisitions, instead of growing product lines and larger marketing campaigns. So when the federal government denied their ability to grow large enough to discourage competition, they had to look elsewhere to increase shareholder profitability. Another venue of motivation was of course based upon the Fraud Triangle. This diagram or model consists of three things for one to commit fraud: pressure, opportunity, and rationalization. WorldCom had all three things – leading them straight towards disaster. The CFO was facing immense pressure from stakeholders and the executive board to increase profits (and growth), he had the opportunity as he controlled the books, and he either had justification or, more probably, a lack of ethics. Applying this triangle to Enron, all three factors were present. Enron was facing imme nse pressure to continue their standing as one of the top 10 fortune 500 companies, as well as continuing to be named one of the world’s most