Enron, once touted as the most innovative American company, declared bankruptcy in December 2001, exposing massive accounting and corporate fraud, according to an op-ed published by Bloomberg Law. University of Houston Law Center’s Victor B. Flatt says the lesson that effective government regulation aids wealth creation rather than hinders it remains largely unheeded, despite law such as Sarbanes-Oxley and other post-scandal reforms. Twenty years ago in December 2001, the wunderkind energy company Enron collapsed spectacularly, destroying $67 billion in assets held by mutual funds, retirees and individual stock investors. Some commentary 20 years later has focused on how Enron heralded the first of companies making money by “disruption” — even as some of this disruption also led to negative impacts on society. The answer is enacting is more nuanced laws and much more effective enforcement. Not deregulation, but good regulation. What can be done more easily is making sure the laws that we do have to ensure fair and equitable markets are adequately enforced. This requires increasing funding for enforcement agencies such as the SEC and the Environmental Protection Administration, and adequate penalties when wrongdoing is detected. Twenty years ago, we were just coming out of the Clinton cooperative enforcement phase, and while that had some good points, the blithe assumption that companies would make more money and do it honestly without enforcement was wrong. Enron was the result. If we focus on correct enforcement, we can avoid the next Enron, and other things we can’t yet imagine. That is the lesson from Enron.
