Who’s Next?

We’ve read about how both Enron and AIG used questionable business practices to increase the bottom line as much as possible. The question I have is if the financial crisis and fall of large companies taught the business world anything? Will senior management be more thoughtful about how their actions will effect the company down the line, or will the business world continue to cut corners in order to outperform quarterly expectations?

Obviously, we can’t know for certain, but if we look at how companies acted right before the financial crisis (which was after Enron) it seems like no one was learning from the past. AIG, according to the case study, was putting too much stock in rating companies and wasn’t doing enough due diligence of its own. This led to a system that was just boosting itself without any real basis. It begs the question of more regulation, but will that help? It’s not like the US government said it was OK for companies to just take investors money and buy sub-prime mortgage loans that they wouldn’t be able to recover from. Regulation is important, but if a company wants to cut corners to make better short-term profits, it’s going to find a way to do so. What I think needs to happen is more oversight within the company. The stockholders, shareholders, and board members all need to know that just focusing on the short-term and not worrying about the implications actions will have on the long-term leads to cutting corners and, ultimately, could lead to financial ruin.

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One Response to Who’s Next?

  1. tpm011 says:

    The culture of making short term gains by sacrificing long term stability might be the fall of our economy

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