Decade of Corporate Scandal Begins to Wind Down

Strategic Insights -

After a five-year period marked by corporate blowups, scandal, and financial meltdowns, there are signs that the decade of scandal might be starting to slow down. The Supreme Court has overturned a big white-collar corruption conviction, a key regulator is stepping down, and the Securities and Exchange Commission (SEC) is undergoing a leadership change. However, despite these developments, there is still much fallout to come from the biggest corporate scandals of the last 20 years, including those involving Enron, WorldCom, and Waste Management.

Key Takeaways:

  • The Supreme Court has overturned the conviction of Arthur Andersen, a key player in several high-profile corporate scandals, including Enron and WorldCom.
  • The court ruled that the trial judge's instructions to the jury did not require enough proof that Andersen knew that its document shredding was wrong.
  • William H. Donaldson, chairman of the SEC, is stepping down on June 30, and President Bush has nominated Christopher Cox to succeed him.
  • Donaldson's tenure at the SEC included implementing sweeping changes, such as requiring best-execution pricing for investors and making it easier for shareholders to nominate directors.
  • The term of Roel C. Campos, a SEC commissioner, expires this year, and Harvey J. Goldschmid plans to return to teaching at Columbia University this fall.
  • Annette L. Nazareth, the SEC's market director, is a potential candidate for an upcoming vacancy.
  • The United States and the European Union are engaged in a trade dispute over aerospace industry subsidies, with the U.S. contesting that low-cost loans to Airbus are illegal under World Trade Organization (WTO) rules.
  • Oil prices have spiked above $55 a barrel due to concerns about stockpiles and demand for diesel fuel and heating oil.
  • General Motors and Ford have reported declining sales, while Nissan, Toyota, and Asian carmakers have seen an increase in sales of fuel-efficient vehicles.

Statistics:

  • 2001: The year Enron filed for bankruptcy, marking the beginning of a decade of corporate scandal.
  • $55: The price of oil that spiked in response to concerns about stockpiles and demand for diesel fuel and heating oil.
  • 28,000: The number of domestic employees that Arthur Andersen has fired since its conviction.
  • 9%: The production reduction planned by General Motors over the next three months.
  • 2%: The output reduction planned by Ford over the next three months.
  • $60: The price of oil that analysts say is now "within the realm of reason."

Sources:

  • The New York Times
  • The Associated Press
  • Supreme Court opinion, Arthur Andersen v. United States (June 20, 2005)
  • SEC press release, William H. Donaldson to step down as SEC chairman (June 21, 2005)
  • White House press release, President Bush nominates Christopher Cox for SEC chairman (June 21, 2005)
  • World Trade Organization (WTO) dispute settlement body, United States v. European Union (filed June 20, 2005)