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(ECONOMICS)“Reasons for Government Intervention in the Market”.

Reasons for Government Intervention in the Market 2005 The nature and process of government intervention in the business environment can be considered one of the most controversial issues in economic literature . The issue itself represents a significant list of procedures and steps the government can undertake intervening into the markets extending from tax collection and price control to specific policies regarding ethical issues and anti-trust legislation . From the critical standpoint , the controversy of the government control is embedded between the concepts of “free market ‘ “command or planned economy ‘ and consumer and shareholder protection . Considering the process of government intervention in contemporary context , it is necessary to note that while many businesses have been examining ethical procedures and policies for some time , corporate scandals such as Enron and WorldCom have caused governments to re-evaluate their principles of control and regulations . Government acts , such as the US Sarbanes-Oxley Act of 2002 , have encouraged companies to develop highly accountable ethics and financial standards in order to avoid punishment . Signed into law on July 30 , 2002 , it significantly changed the way many public corporations operate . US Sarbanes-Oxley Act of 2002 , commonly referred to as Sarbox , affects many roles within a corporation including :directors , top management , auditors , accountants and financial analysts .The key goals of the Sarbanes-Oxley Act and simultaneously reasons for government intervention on the broad scope were to enhance financial disclosures , increase auditor independence , improve corporate governance , protect public company employees , whistleblowers and shareholders and increase accountability of corporate executives .Practically , the initiation and implementation of the Sarbanes-Oxley Act was a result of the US corporate crisis – Enron and WorldCom .The former CFO of Enron , Andrew Fastow , allegedly combined many of fraudulent techniques along with deceit , circumventing the rules ,temporarily changing or suspending the rules , and outright thievery to achieve his objectives . Fastow has been accused for mismanaging ,misappropriating , and embezzling an estimated 390 million . Practically it was accompanied with Enron ‘s strategy of not revealing that Fastow ‘s partnerships were forcing the company to sustain a 462 million charge .Simultaneously , the report indicated astonishing 1 .2 billion reduction in shareholder equity , which remarkably was interpreted as an undisclosed “accounting error ” Practically , Enron issued 62 million shares of its own stock to the partnerships , which promised to repay the stock ‘s value to Enron , while the latter improperly treated these repayment pledges as if they were cash . Logically , once the partnerships failed to compensate the value of the stock , Enron retired it , and company ‘s investors experienced a 1 .2 billion loss in value .John Brennan , Chairman and CEO of the Vanguard Group , has suggested that Enron has perhaps forever changed the public ‘s perspective of “business as usual ” in the corporate world . Before Enron , he said , accountants were sacred guardians of financial truth CEOs were celebrities and visionaries and , corporate boards actually exercised real control over the companies they directed . Sadly , nobody believes much or any of this anymore (Brennan , 9 . Since then , governmental intervention in the form of acts and other…

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