why the failures of Enron led to increased emphasis on corporate codes of conduct? Solution Answer ; The collapse of Enron in 2001 shook the corporate world and the investors’ faith in the corporate governance mechanism got a serious jolt due to this incidence. Enron had a Corporate Governance system , but its Board of Director’s took decision to wave off Corporate ethics by stating some practice as “Standard way of Business”. Enron Board of Directors allowed debts to be transferred to unconsolidated off-the book entities and allowed to ommit $27 billion from Balance sheet. It ultimately led to the collapse. Also, the leadership team blatantly used insider information to trade in stock without and adherence to corporate ethics. Arthur Anderson was also accomplice to these financial irregularities and was equally responsible as Auditor of Enron for this fiasco. The horizontal hierarchy in the organization created a nexus among few groups of employees who could manipulate and hide financial misconducts without any knowledge of majority of the employees. The failure and willful avoidance of corporate governance and corporate ethics and the lack of defined accountabilities for corporate leadership thus led to the rethink of oversight mechanism for public companies to protect the investors’ interest. Sweeping reforms by NYSE led to the incorporation of regulations in Section 406(a) of Sarbanes Oxley Act. These provisions now make compulsory for listed companies to declare whether they have code of ethics, disclose specifically any waiver to code of ethics . It also defines the code of ethics , who are covered by this, how to internally report violation of code of ethics, The role of Directors, the role of Audit Committee , the mechanism of self-disclosure regarding the operations of the company. Thus the fallout of Enron ensured massive reforms and governance mechanism put in place through SEC reporting and SOX control mechanisms to enforce corporate ethics and protect the interest of investors. .

1. why the failures of Enron led to increased emphasis on corporate codes of conduct?
Solution
Answer ;
The collapse of Enron in 2001 shook the corporate world and the investors’ faith in the
corporate governance mechanism got a serious jolt due to this incidence.
Enron had a Corporate Governance system , but its Board of Director’s took decision to
wave off Corporate ethics by stating some practice as “Standard way of Business―. Enron
Board of Directors allowed debts to be transferred to unconsolidated off-the book entities and
allowed to ommit $27 billion from Balance sheet. It ultimately led to the collapse.
Also, the leadership team blatantly used insider information to trade in stock without and
adherence to corporate ethics.
Arthur Anderson was also accomplice to these financial irregularities and was equally
responsible as Auditor of Enron for this fiasco.
The horizontal hierarchy in the organization created a nexus among few groups of employees
who could manipulate and hide financial misconducts without any knowledge of majority of the
employees.
The failure and willful avoidance of corporate governance and corporate ethics and the lack of
defined accountabilities for corporate leadership thus led to the rethink of oversight mechanism
for public companies to protect the investors’ interest.
Sweeping reforms by NYSE led to the incorporation of regulations in Section 406(a) of Sarbanes
Oxley Act.
These provisions now make compulsory for listed companies to declare whether they have code
of ethics, disclose specifically any waiver to code of ethics . It also defines the code of ethics ,
who are covered by this, how to internally report violation of code of ethics, The role of
Directors, the role of Audit Committee , the mechanism of self-disclosure regarding the
operations of the company.

2. Thus the fallout of Enron ensured massive reforms and governance mechanism put in place
through SEC reporting and SOX control mechanisms to enforce corporate ethics and protect the
interest of investors.