The Smartest Guys in the Room (Essay Sample)

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The Smartest Guys in the Room
Question 1
The Enron scandal stands out as one of the most significant examples of corporate collapse in the United States. This magnitude of this scandal ranks in similarity with the failure of loans and savings banks in the country during the 1980s. The scandal notably illustrates the need for the formulation and implementation of significant reforms in the realms of corporate governance and accounting. Additionally, the magnitude of the scandal necessitates the examination of the ethical quality of business culture in the capitalist setting as well as the nature of corporations in the country and beyond. The company highlighted a significant number of established structures for ensuring the prevention of fraud. The unfortunate thing about this scenario is that it failed to or intentionally refrained from adherence to its measures. Primarily, the company seems to have based fraud control structures on the presumption that people are inherently good. The basis of fraud control structures on this assumption failed as evidenced by the number of people that knew what was happening at the company but failed to open up to the right authorities.
Question 2
As an investor, the most significant safeguard one can ensure prior to investing in a multinational corporation is undertaking an effective examination of the ethical climate and corporate culture. An investor holds the responsibility of closely analyzing the state of corporate culture governing a company prior to making a significant investment. The values and norms of behavior are extremely important in this context. For instance, Enron was noteworthy for its tendency of rewarding and encouraging employees to achieve success regardless of the cost. This practice resulted in nurturing a culture of greed. Investors ought to ensure that the companies in which they place their investments have cultures that encourage employees to safeguard the reputation and assets of the companies. Investors should also pay close attention to finding out the nature of the risks involved in undertaking certain investments. Investors can easily fall prey to the records and trends that usually portray potential investments as lucrative. Enron is representative of such a case. A considerable number of investors opted to risk their finances solely basing their investments on the market outlook of the company. A scenario where the investors take the time and undertake an analysis of the potential risks involved investments can play a significant ...