Question

Think about the following statements by the former CEOs of companies that had accounting fraud. CEO Ken Lay, Enron Richard Scrushy, HealthSouth Bernie Ebbers, WorldCom John Rigas, Adelphia QUOTE “Enron was an enormous corporation. How could I have known everything going on everywhere in the company?” “You have to rely; you have to trust people. You have to believe. You have to delegate ...signed off on the information based on what was provided to me. And what I was told.” “Bernie Ebbers did not know about the accounting decisions of Scott Sullivan to reassign billions of dollars.” “John Rigas had a right to trust and rely on professionals and his own staff to get the financials right.”

Are the CEOs responsible for knowing what goes on at their companies?

Are they able to find out what is happening?

Are they criminally responsible?

Are they ethically responsible?

Please define what a crime is and state the difference between criminal and civil law.

Answer 1

CEOs are entrusted with the responsibility of the entire operations of an organization and are also responsible for any fraud or wrong doing that happens at a company. However, the CEO cannot be totally responsible for all wrong doings happening at the company since it is certainly not possible for one person to have all the information for whatever is happening. The reason behind this is that the CEO relies on a team of directors and other employees reporting to him over the company's performance and other on goings. They cannot be held criminally responsible always unless they have a hand in the wrong doing of the company's action and have influenced the unethical decisions. They are certainly ethically responsible and must promote ethics organization wide.

A crime is an offence that is punishable by law. A criminal law is one which deals with the government offences and civil law deals with private offences.