Enron And Its Impact On Enron 's Corporate Bankruptcy Essay

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.

Enron was an energy trading and communications company located in Houston, Texas. During 1996-2001 Enron was given the name of America’s Most Innovative Company by Fortune magazine as it was the seventh-largest corporation in the US. The problem that led this company to bankruptcy was due to the fact that fraudulent accounting practices took place allowing Enron to overstate their earnings and tuck away their high debt liabilities in order to have a more appealing balance sheet (Forbes.com, 2002). Enron’s accounting team “cooked” the books to every meaning of the word so that their investors would not see anything wrong with the failing organization. This poorly structured company led people to jail time, unemployment, and caused retirement stocks to be dried up. Enron had a social responsibility to its stockholders and rather than being up front and honest about the failing company they hid every financial flaw in order to keep receiving money from its investors. By Enron not keeping a social

Enron had the largest bankruptcy in America’s history and it happened in less than a year because of scandals and manipulation Enron displayed with California’s energy supply. A few years ago, Enron was the world’s 7th largest corporation, valued at 70 billion dollars. At that time, Enron’s business model was full of energy and power. Ken Lay and Jeff Skilling had raised Enron to stand on a culture of greed, lies, and fraud, coupled with an unregulated accounting system, which caused Enron to go down. Lies were being told by top management to the government, its employees and investors. There was a rise in Enron 's share price because of pyramid scheme; their strategy consisted of claiming so much money to easily get away with their tricky ways. They deceived their investors so they could keep investing their money in the company.

Greg Whalley, (former Enron President and Chief Operation Officer) had six to eight conversations last fall with the Treasury’s Department Peter Fisher, including one in which he asked Fisher to call Enron’s lenders as they decided whether to extend credit to the company.

This now bankrupt company, misappropriated investments, pension funds, stock options and saving plans after deregulation and little oversight by the federal government. However, with deregulation an increasing competitive culture emerged as the CEO Jeffry Skilling motto to his organization was to “do it right, do it now, and do it better” this was the rally cried that pushed ambitious employees to engage in unethical behavior as Enron use deceptive “accounting methods to maintain its investment grade status” (Sims, & Brinkmann, 2003, pp.244-245). As Enron continued to flourish and received accolades from the business community this recognition drove executives to continue the façade of bending ethical guidelines before their public fall from

The story of Enron is truly remarkable. As a company it merely controlled the electricity, natural gas and communications sectors of the world. It reported (key word, reported) revenues over one hundred billion US dollars and was presented America’s Most Innovative Company by Fortune magazine for six sequential years. But, with power comes greed and Enron from its inception employed people who set their eyes upon money, prestige, power or a combination of the three. The gluttony took over sectors which the company could not operate proficiently nor successfully.

As with much of Enron, their outward appearance did not match what was really going on inside the company. Enron ended up cultivating their own demise for bankruptcy by how they ran their company. This corrupt corporate culture was a place whose employees threw ethical responsibility to the wind if it meant financial gain. At Enron, the employees were motivated by a very “cut-throat” culture. If an employee didn’t perform well enough, they would simply be replaced by someone who could. “The company’s culture had profound effects on the ethics of its employees” (Sims, pg.243). Like a parent to their children, when the executives of a company pursue unethical financial means, it sets a certain tone for their employees and even the market of the company. As mentioned before, Enron had a very “cut-throat” attitude in regards to their employees. This also became one Enron’s main ethical falling points. According to the class text, “employees were rated every six months, with those ranked in the bottom 20 percent forced to leave” (Ferrell, 2017, pg. 287). This system which pits employees against each other rather than having them work together will create a workplace of dishonesty and a recipe of disaster for the company. This coupled with the objective of financial growth, creates a very dim opportunity for any ethical culture. “The entire cultural framework of Enron not only allowed unethical behavior to flourish,

The bad corporate culture at Enron deeply contributed to ethics digressions while pointing out how it led to its bankruptcy. A corporate code of ethics as well as an organizational culture are not only essential and vital to a company; they represent the core of a long term success. Notwithstanding the presence of “The Smartest Guys in the Room”, Enron’s corporate culture did not succeed in creating an ethical environment inside the company.

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 company Enron was formed in 1985 after two natural gas companies, Houston Natural Gas and InterNorth merged together. Kenneth Lay, former chief executive officer of Houston Natural Gas was named CEO of Enron and a year later, Lay was assigned to the chairman of Enron. A few years later, Enron launched a website to allow customers to buy stock for Enron, making it the largest business site in the world. The growth of Enron was rapid; it was even named seventh largest company on the Fortune 500 list; however things began to fall apart in 2001. (News, 2006). In the third quarter of that same year, Enron posted an enormous loss of over $600 million in four years. This is one of the reasons why one of the top executive resigned even though he had only after six months on the job. Their stock prices fell dramatically. Eventually, Enron filed for bankruptcy protection. This caused many investors to lose money they had invested in the company and employees to lose their jobs and their investments, including their retirement funds. The filing of bankruptcy and the resignation of one of the top executives, also led to an investigation by the U.S. Securities and Exchange Committee, which proved to be one of the biggest scandals in U.S. history. (News, 2006). All former senior executives stood trial for their illegal practices.

With Enron, the responsibility and blame started with Enron’s executives, Kenneth Lay, Jeffrey Skilling, and Andrew Fastow. Their goal was to make Enron into the world’s greatest company. To make this goal a reality, they created a company culture that encouraged “rule breaking” and went so far as to “discourage employees from reporting and investigating ethical lapses and questionable business dealings” (Knapp, 2010, p. 14). They insisted the employees use aggressive and illegal

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

Question 1 Summarize 1 one page how you would explain Enron’s ethical meltdown: Enron was an energy company founded by Kenneth Lay in 1985 through a merger of vast networks of natural gas lines. Enron specialized in wholesale, natural gas, and electricity, and made its money as a wholesaler between suppliers and customers rather than actually owning any. Enron in fact didn’t own any assets, which made their accounting procedures very unusual. The lack of accounting transparency at Enron allowed the company’s managers to make Enron’s financial performance better than it actually was. The organizational culture at Enron was to blame for it’s ethical meltdown. Enron’s accounting scheme slowly began to erode its ethical practices, which soon led the culture of Enron to become a more aggressive and misleading business practice. Enron reported profits from joint partnerships that were not yet attained in order to keep stock prices up (or make wall street happy). As this was happening employees began to notice the ethics in senior management (leadership) deteriorating, and soon after they to would follow in their footsteps. Senior management thought they were saving their company from financial ruin and though lying was ok if it meant saving the company. Investors would surely sell their stocks if they really knew the situation the

Heavily influenced by the culture to compete rather co-operate, employees at Enron were motivated and driven by huge bonuses and they became scared of the ranking criteria. They were also scared by being asked to leave the company of they did not perform well. All this resulted in unhealthy business activities, which drove colleagues to push each other backwards rather than to help each other to finalize the deal or execute the sale

Ethical behavior, in a general sense, is a definition of moral behavior in regards to lawfulness, societal standards, and things of that nature. In the business world, ethics commonly refer to acceptable and unacceptable business practices within the workplace, and all other related environments. The acceptance of colleges regardless of ethnicity, gender, and beliefs, as well as truthfulness and honesty in relation to finances within the company are examples of ideal ethical business conducts. Unethical business behavior would include manipulating procedures based on bias or discrimination, engaging in activities that promote political gain, as well as blatant fabrication of monetary factors within the company and “can affect