Corruption at Tyco: Case Discussion Questions

During the year 2000, Enron was exceeding all expectations, its stock was through the roof, and the company seemed to be on top of the world. The next year Enron declared bankruptcy. So how did a company rise and fall so quickly? The key in analysing this question lies in Enron’s organizational culture, which is defined as “a shared meaning held by members distinguishing an organization” (Robbins and Judge, Essentials of Organizational Behavior, 269). During its prime, Enron appeared to be a successful and innovative company, but in reality was a company rooted in an organizational culture of corruption and greed. The five culture dimensions of stability, risk taking and innovation, attention to detail, outcome orientation, and aggressiveness are key to understanding how unethical behavior became such a problem at Enron.

Becoming a transformational leader can occur either because the leader has a model or mentor that is a transformational leader, because he/she is a born transformational leader, or through reflection. Senge (1990) wrote that “Learning through reflection is about finding the creative tension...between an understanding of current reality and a vision of desirable practice” (as cited in Johns, 2004, p. 24). In addition, Schuster (1994) noted that one who desires to become a transformational leader can cultivate certain qualities that are characteristic of such a leader: a stimulating vision for the organization, honesty, empathy, authenticity, the ability to defer self-interest to ensure that others are recognized, a holistic concern for the organization, the ability to share power with others, and the ability to develop others (as cited in Johns, 2004, p. 25). The transformational leader is also an effective communicator who persists during hard times and still has the courage to continue to move ahead even when fatigued and encountering difficulties (Schuster, 1994, as cited in Johns, 2004, p. 25).

Prior to the Tyco scandal, the company was one of America's largest conglomerates, with operating revenues of 38 billion dollars and 240,000 employees, worldwide. Tyco Laboratories began operations in 1960, performing experimental work for the U.S. government. The firm went public in 1964 and quickly expanded, mostly by acquisition, to exploit the commercial applications of its work. Dennis Kozlowski joined the company in 1975 as an assistant controller. The company subsequently shifted its focus from growth to profits within its three primary divisions: fire protection, electronics, and packaging. Kozlowski joined Tyco's board in 1987 and became president and chief operating officer two years later. Kozlowski

As said in every economics class, the reason every business goes into business is to make money. The same can be said in criminal cases involving businesses. In the majority of cases, executives and people highly ranked in the company tend to bend the numbers in the financial/accounting areas of the business or corporation. They do not do this for fun, but rather to make money. Something needs to be done before corporations really get out of hand.

The word “fraud” was magnified in the business world around the end of 2001 and the beginning of 2002. No one had seen anything like it. Enron, one of the country’s largest energy companies, went bankrupt and took down with it Arthur Andersen, one of the five largest audit and accounting firms in the world. Enron was followed by other accounting scandals such as WorldCom, Tyco, Freddie Mac, and HealthSouth, yet Enron will always be remembered as one of the worst corporate accounting scandals of all time. Enron’s collapse was brought upon by the greed of its corporate hierarchy and how it preyed upon its faithful stockholders and employees who invested so much of their time and money into the company. Enron seemed to portray that the goal of corporate America was to drive up stock prices and get to the peak of the financial mountain by any means necessary. The “Conspiracy of Fools” is a tale of power, crony capitalism, and company greed that lead Enron down the dark road of corporate America.

Armstrong and Dennis R. Balch in the Journal of Legal, Ethical and Regulatory Issues, Volume 18, Number 2, 2015 they interview two former Chief Financial Officers, Aaron Beam and Weston Smith to conduct qualitative assessment using the Banality of Wrongdoing Model. During the assessment Mr. Beam and Mr. Smith were asked fourteen questions to gauge “the culture of competition, ends-biased leadership, missionary zeal, legitimizing myth, the corporate cocoon, banality of wrongdoing and greed.” The authors of this study concluded that Mr. Beam and Mr. Smith did not attempt to justify or rationalize their behaviors or their part in unethical practices and accounting fraud but rather admitted to being fully aware of their actions and knew the ramifications of doing such. Rather than trying to justify their behaviors it became more of anxiety and stress to both of them, however they “used the defense that they were more or less forced into the behavior by the Chief Executive Officer, Richard

years of leading Sunbeam successfully out of a slump that had threatened the long-term viability

The Enron scandal has far-reaching political and financial implications. In just 15 years, Enron grew from nowhere to be America's seventh largest company, employing 21,000 staff in more than 40 countries. But the firm's success turned out to have involved an elaborate scam. Enron lied about its profits and stands accused of a range of shady dealings, including concealing debts so they didn't show up in the company's accounts. As the depth of the deception unfolded, investors and creditors retreated, forcing the firm into Chapter 11 bankruptcy in December. More than six months after a criminal inquiry was announced, the guilty parties have still not been brought to justice.

Enron’s ride is quite a phenomenon: from a regional gas pipeline trader to the largest energy trader in the world, and then back down the hill into bankruptcy and disgrace. As a matter of fact, it took Enron 16 years to go from about $10 billion of assets to $65 billion of assets, and 24 days to go bankruptcy. Enron is also one of the most celebrated business ethics cases in the century. There are so many things that went wrong within the organization, from all personal (prescriptive and psychological approaches), managerial (group norms, reward system, etc.), and organizational (world-class culture) perspectives. This paper will focus on the business ethics issues at Enron that were raised from the documentation Enron: The Smartest Guys

The first important factor in the Enron case advanced interests on share price. The second factor how the company was liberalized over the past 20 years along with the reduction of legal responsibility of investment banks and accounting firms. The third factor, which is the most important, was the immediate alteration of pay packages given to investment bankers, executives, and accountants (Barreveld, 2002). In this case, the factors mentioned above was a result of the culture implemented by the executive leaders whom were influenced by unethical behaviors they engaged in. One could agree that Enron was definitely reaping the bad seeds that the

Enron’s ride is quite a phenomenon: from a regional gas pipeline trader to the largest energy trader in the world, and then back down the hill into bankruptcy and disgrace. As a matter of fact, it took Enron 16 years to go from about $10 billion of assets to $65 billion of assets, and 24 days to go bankruptcy. Enron is also one of the most celebrated business ethics cases in the century. There are so many things that went wrong within the organization, from all personal (prescriptive and psychological approaches), managerial (group norms, reward system, etc.), and organizational (world-class culture) perspectives. This paper will focus on the business ethics issues at Enron that were raised from the documentation Enron: The Smartest Guys

In this case of Enron the corporate culture played a vital role of its collapse. It was culture of full of moneymaking strategies and greed, in the firm Greed was good and money was God. There was no or very little regards for ethics or the law, they operated as there was no law and ethics in the world (Enron Ethics, 2010). Such culture affected all the employees of the firm from top to down. Organizational culture supported unethical behaviour and practises, corruption, cheating and those were all widespread. Many executives and managers knew that the firm is following illegal and unethical practises, but the executives and the board of directors did not knew how to change this unethical culture, the firm used creative accounting and were making showing misleading profits every day. Reputation management enabled them carry on their illegal and unethical operations. Moreover if the company made huge Revenue in the unethical way then the new individual who joined the firm would also have to practise all those unethical practises to survive in the company. All of the management was filled by greed and ambition, their decisions became seriously imperfect, thus the firm fell back and managers had to pay in the price in the form imprisonment and fines. Greed is the main key factors that brought the Enron “the most innovative company” to downfall. Enron was looking into the ways of

The case study is about Enron and about their biggest failure that lead the company towards bankruptcy. Enron got bankrupt to the extent that was no point of returning back and reversing its wrong doings. The only thing that the company had to think about was how to return the losses of its creditors. Enron Corp. was left with $12 billion in assets which was to be distributed among more than 20,000 creditors. Around 80% of creditors of Enron backed the long-awaited reorganization plan of the company. Creditors were seeking to recover more than $1200 billion. According to Stephen F. Cooper, who was the interim chief executive officer of the company said that only $67 billion was the justified amount. The amount of assets that was available to creditors could grow if the management of Enron succeeded with the mega-claim against financial institutions and leading banks that helped the organization in creating complex deals which helped it inflate cash flow and hide debt (Niskanen, 2005).

A key factor to Enron’s fall from grace, was due to the foibles of its corporate leadership, in particular, how certain executives were willing to overlook unethical behavior in lieu of profits. For example, Ken Lay, Enron’s Chairman, espoused the ideals that Enron had higher level of morals than the average company (Gibney, 2005). However, on several instances, he failed to enforce or show that level of commitment. In the Vahalla case, he allowed traders that were involved in manipulating and gambling the company’s earnings to continue their operations, despite being warned of their fraudulent behavior (Gibney, 2005). His justification, at the time, was that Vahalla was the only part of the company that was making any money (Gibney, 2005).

A multitude of choices made by executives at WorldCom led to the ultimate demise of the company as it was previously known, the employees and their livelihoods’, and the trust of the American people. In a time when corporations fail to set ethical standards and provide transparency to investors, how do we change corporate culture on a national level? By analyzing choices made to improve stock prices and company image that ultimately result in failure-- we can guide