NCJ Number
216506
Journal
British Journal of Criminology Volume: 46 Issue: 6 Dated: November 2006 Pages: 1091-1109
Date Published
November 2006
Length
19 pages
Annotation
This paper examines whether the Enron case and the government's strategy in responding to it will have implications for addressing the business practice of "creative compliance," which involves following the letter of the law and regulations while adopting creative maneuvers in accounting and business structure that avoid truthfulness about a company's true economic condition.
Abstract
Under "creative compliance," business practices that might be criminal if legally structured in one way could be legally repackaged and claimed to be lawful. The end result, regardless of the repackaging, however, is a facade of financial strength for the purposes of the company's stock value that hides the true state of the company's financial worth. Such practices undermine the basic principle of stock trading, i.e., that a company's stock value reflects its actual financial worth and its prospects for the future. This paper argues that the government's enforcement strategy in the Enron cases has not directly addressed the practice of "creative compliance" that is regularly used by businesses trading on the stock market. Still, the various critical analyses of Enron's way of doing business has given priority to the problem of "creative compliance." Legislators and regulators are now aware that compliance with the letter of the law does not fulfill the law's intent. At best, laws and regulations are but guidelines for ethical practices that inspire confidence in financial reports on which stock prices are based. If companies are not committed to the intent of the laws and regulations, and corporate culture continues to praise "creative compliance," then Enron-type disasters will continue to occur. 39 references