The article “The Greed Cycle” is an in depth look of the advancements in the ways business compensates its heads of industry. The article links the trend of corruption among executives when there was lax regulation, and methods of fixing numbers. The question that is purposed by the article is if greed comes naturally; or if it is an evolution that corporate America creates. It is true that the creation of Sarbanes-Oxley has significantly prevented the events that occurred regarding CEOs and the stock option crisis. There have been numerous recent events, however, that have occurred with CEOs and others alike make me believe John Cassidy’s theory that there is validity to his theory of a greed cycle.
The problem was regulation;
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What added to the greed cycle was that, “many companies were repricing their senior executives’ stock options at a lower level whenever the stock price fell.” Looking upon this now it is impossible to rationalize what occurred with these companies, other then acknowledging their greed. It is clear that certain members of the American government were pawns of corporations; but what about the people who were supposed to be double checking the books?
Auditors from accounting firms are supposed to be the third party that applies GAAP to all financial statements; which will result in an unbiased opinion. The idea that this crucial sector could be tainted by greed is a difficult concept to accept; but it happened. The fact that one of the “Big Five”: Arthur Anderson could be an essential part to the corporate collapse that happened is unthinkable. It happened; however, and with multiple corporations excluding Enron. Many executives soon realized that, “stock options instead of spurring corporate leaders to build businesses that would create wealth for decades to come, encouraged them to manage for the short term.” It was the responsibility of the auditing firm to catch these trends, and to report them. Greed clearly in the means of compensation clouded the judgment of auditors; which resulted in false financial statements.
The rest of what happened is history; and we cannot change history we can only study it and try not to repeat its