ABSTRACT
The Enron scandal is now deeply embedded in the collective psyche of our society. The Enron-era scandals made great theater but should have occasioned a searching examination of the flaws in the financial system that encouraged executives to engage in such massive accounting manipulations. Ironically, the root of the Enron-era corporate scandals lies in the corporate reformers’ insistence that the interests of shareholders and corporate management be aligned through stock option grants. The Securities and Exchange Commission’s (SEC’s) full disclosure system failed to prevent or detect the Enron-era scandals. The SEC full disclosure model is fatally flawed and needs reform. Hedge funds, private equity, sovereign wealth funds, venture capitalists, and electronic trading have created a marketplace that does not fit the model that the SEC was created to regulate.
