A Year After Enron, What's Changed?

It was just one year ago that Enron, a once high-flying Houston-based energy colossus, became a household word for massive corporate failure.

Thanksgiving Day marks the one-year anniversary of the day that Enron's credit rating was downgraded to junk bond status, prompting rival energy producer Dynegy to back out of its proposed merger with the company. Panicked investors sent Enron's share price below $1, and the company filed for Chapter 11 bankruptcy just four days later.

Enron's downfall stemmed from multi-million dollar losses the company reported in October 2001, partly related to off-balance sheet partnerships run by former Chief Financial Officer Andrew Fastow.

The company's demise was not only notable for the well-publicized financial damage its workers and investors suffered, but also because it was the first in a long line of corporate scandals from companies like WorldCom, Adelphia, Global Crossing and Tyco that have rocked U.S. financial markets and investor confidence in the past year.

So one year and countless corporate scandals after Enron, can corporate America be trusted again? While experts say that government and financial institutions have made steps in the right direction, others say there is still much to be done before restoring investor trust.

"Just the fact that there is more awareness in every sector about issues of corporate responsibility and accountability is a good thing," said Mike Lux, president of American Family Voices, a Washington, D.C.-based advocacy group for low- and middle-income families. "Having said those happy things, we still have an enormous way to go."

Pricey Toll on American Workers

To be sure, corporate scandals have taken a heavy financial toll on the American public.

Labor union AFL-CIO estimates that workers have lost $1.5 trillion from their retirement savings funds since January of 2002.

Further, thousands and thousands of workers have lost their jobs. Some 4,000 Enron employees were let go after the company declared bankruptcy. The AFL-CIO estimates that 28,500 workers have lost their jobs from Enron, WorldCom and accounting firm Arthur Andersen alone.

"I think [Enron] was one of the more spectacular discouraging events," said Don Cassidy, senior research analyst at Denver-based mutual fund tracker Lipper. "Plainly, a lot of mutual funds got caught with that one and WorldCom."

Perhaps the biggest move the Bush administration has made to calm investors' nerves was the passage at the end of July of a sweeping corporate crackdown bill that, among other things, added criminal penalties and prison terms for corporate fraud and document shredding, imposed restrictions on accounting firms that consult for companies whose books they audit and required top company executives to personally vouch for the accuracy of their companies' financial statements.

The investment community has also tried to put its own safeguards in place to ensure good corporate governance. The New York Stock Exchange approved new standards and changes in the corporate practices of listed companies this summer, which includes requiring its listed companies to keep a majority of independent directors on their boards.

"It's really shifted the balance of power between the CEO and the board," said Charles Elson, director of the Center for Corporate Governance at the University of Delaware. "There's a public acceptance from the positive impact of good corporate governance."

Is Bush's Crackdown Enough?

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