Professional Documents
Culture Documents
Assignment 2
(Lecturer)
CIIT/FA09-MBA-027/LHR
CIIT/FA09-MBA-069/LHR
Najm-ul-Hassan
CIIT/FA09-MBA-112/LHR
ii) Executives were interested in their personal reward structure ignoring the
stakeholders’ benefits.
iii) Board members were mostly highly rewarded and consist of the friends,
who did not raise questions on any doubtful and ambiguous records.
iv) Non-Executive Directors were also highly rewarded and they worked
independently.
v) Audit Team was bribed, so that the team will produce a clean audit report.
vi) Illegal profits were generated and it was shown that all the policies and
rules implemented from the top were for the benefit of the company and
shareholders, and hence, were ethical.
vii) The cost of heavy machinery purchased in a particular period was not
spread by the company in the next coming financial years.
2) Who was mainly responsible for the downfall of Enron and WorldCom?
Almost every person involved in any type of unhealthy activity was responsible for
the downfall of both companies. However, they can be arranged in a sequence from
most responsible to less responsible as in the following:
iii) Internal Audit Team thirdly: As they were bribed by Board and
Management to show their audit report clean.
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3) What do you learn from these examples?
As a Business Individual, one can learn a lot from these two corporate scandals. One
can understand the importance of Corporate Governance in the recent business life.
However, we learnt that:
i) The business should implement those rules and policies which are
favourable for almost every stakeholder of the company. Nothing should go
wrong while implementing the right rules and policies.
ii) Showing the fine and fair records is an easy task in one glance, but
difficult to manage after showing them. When these records are shown as fine
and fair, they raise a lot of questions in the External Audit Team as well as the
Stakeholders of the company.
iii) The Internal Audit Team should keep proper check and balance on the
company’s records. Such team should fulfill its work with honor, as it is an
obligation for the team itself.
vi) The shareholders should have complete right to vote for directors. So that
they can use their right in choosing the most suitable persons for the executive
personals.
As a business consultant, we should take the following steps if we want Enron and
WorldCom again on the peak in market.
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i) Give proper voting right to the shareholders of the company. The Board
will be elected again by shareholders so that they may choose most suitable
executive personals.
ii) A strict following to the company code of conduct will be made. The
company culture will improve and as a result, the company may be prevented
from frauds and cheats.
iii) A new audit team will be chosen for conducting the audit work. It will be
trained for not having involved in unhealthy activities and there should be
proper check and balance of the accounts.
iv) The records shown by only papers will not be encouraged. The actual
stocks and plants will be physically visited by the audit team and any type of
mismatching of actual things with reported things will be noted and reported
clearly. If there is a chance of fraudulent again, interim audit will be suitable
for the company.
v) Any new policy and rule will be clearly disclosed to the stakeholders.
Nothing will be kept hidden or ambiguous.
vi) Governance Best Practice will be followed to regain the customers trust on
the company.
vii) Every Annual General Meeting will decide the board members and their
legal and ethical obligations for the next year.
One fact should be accepted that when a company suddenly collapses, it is very
difficult for itself to regain its previous status and goodwill. The above
recommendations may not be successful depending upon the circumstances. There
may be a possibility that the company will recover its status as slowly as it may take
few years. However, a Business Consultant should taken into account all the
circumstances regarding the market, so that he will make the best choices he can.
References:
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