Management and Organizational Structure

Before going into an analysis on the organizational culture at Enron, I will first elaborate on the severity of the unethical behavior that existed at Enron. The problem can best be shown in the words of an Enron employee who said “If I’m going to my boss’s office to talk about compensation, and if I step on some guy’s throat and that doubles it, then I’ll stomp on that guy’s throat”(Enron: The Smartest Guys in the Room). This culture of greed and corruption can also be seen through Enron’s mark to market accounting system, in which Enron cashed in on ideas and “future profits” without actually making anything. Furthermore,

The company is geographically located in most major united states locations. It employs a hierarchal organizational design. One of the contributing factors to its success is the company’s success in providing a dining experience for its customers that excel in choices, price, customer service, and serving size. The company is known world-wide for its delicious cheesecakes with the key factor being the variety.

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,

WorldCom, for example, was facing a downward trend in their industry. The telecommunications company was going south, especially thanks to text messaging and the internet. In addition, the government denied them the ability to merge with Sprint (a $129 billion dollar merger), which quickly halted their growth. WorldCom had built a growth strategy built upon mergers and acquisitions, instead of growing product lines and larger marketing campaigns. So when the federal government denied their ability to grow large enough to discourage competition, they had to look elsewhere to increase shareholder profitability. Another venue of motivation was of course based upon the Fraud Triangle. This diagram or model consists of three things for one to commit fraud: pressure, opportunity, and rationalization. WorldCom had all three things – leading them straight towards disaster. The CFO was facing immense pressure from stakeholders and the executive board to increase profits (and growth), he had the opportunity as he controlled the books, and he either had justification or, more probably, a lack of ethics. Applying this triangle to Enron, all three factors were present. Enron was facing immense pressure to continue their standing as one of the top 10 fortune 500 companies, as well as continuing to be named one of the world’s most

Enron was facing risks, risks from every angle. You can see from the history to the demise of the company everything was based on risk. Even when it came to the personal lives of those in charge, you can find some type of risk. Being a Houston native, I did not quite understand the reaction to Enron. I did not understand why it went so far as to changing the name of a stadium from Enron to Minute Maid Park. I was only a teen at the time, but now I am not. I now hope to explain my opinion on how the past, the executive’s and outliers were red flags prior to the Enron crisis. My thoughts on how they could have handled the matter. Lastly, express what I would have done if I was an executive or general council to such a company.

The company’s stakeholders include primary groups of customers, employees, shareholders, owners, suppliers, etc. and secondary groups of community. All stakeholders have their own self-interests. While employees want secure jobs with high earnings; customers want quality products with cheap prices, which may eventually result in the company and employees’ low income. Being said that, the corporation owes all stakeholders the obligations to meet their interests. That brings in the ethical issue of conflicts of interest, one of key problems at Enron. CFO Andrew Fastow created financial partnership to hide Enron debt, from which he allegedly collected $30 million in management fees. The action obviously made Enron financial data look good, but at the same time deceived the company’s investors about the real performance. Many investors may make their investing decisions based on those false data. And that’s when the collapse begins.

Capitalism is an amoral system that follows protocol of mechanical laws of supply and demand. Over the course of two centuries our country has tried to introduce ethics and morality into economic constructs. Anti-trust, labor laws, and regulation have been our attempts to introduce an ethical element into an otherwise unfeeling system of exchange. The reason, an attempt to reduce damage that is possible by the manipulation of capitalism. And to not only to create an even playing field but keeping the field from reverting back to being occupied by serfs. Corporations offer many benefits to society, increased supply of goods, tax revenue, jobs…etc. They can also cause damage as in the case of Enron Corporation.

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

Enron failed all governance system practices. They reported improper equity shares; they did not abide by the GAAP. Enron was a victim of profit and revenue at no cost. The Enron executives accounting staff, accounting firm and law firm made erroneous decisions just to keep their revenue incoming. They reported false financial reporting continuously, stockholders had great losses, employee retirement fund was depleted and they did not honor their code of ethics.

Enron was a dream come true for a lot of people, but it was also a nightmare waiting to happen for many more. I am going to examine the collapse of Enron from the management perspective. The three examples of Enron behaving badly that I am going to study are the incidents in Valhalla, the electricity trading in California and the conflict of interest between Andy Fastow and his special purpose entities (SPE). These are just a few cases that led to the failure of the "World's Leading Company."

The main purpose of this report is to understand the Enron business practices so that it can be analysed that what leadership traits & style were responsible for its failure. Enron was a US company, which was founded in 1986 with the merger of Houston Natural Gas & Internorth the two big natural gas pipeline companies. Enron was a huge company that reached to remarkable heights but eventually collapsed due to improper business practises, accounting frauds, and unethical culture with in an organization. Top management of Enron had used their position & power in wrong way resulting bankruptcy of such a huge company in 2001. This report will examine the internal culture of the organisation as well as the leadership practices of its top management. Further in this report I will be explaining the disaster happened at Enron by trait & transformation leadership theory and ethical theory that have been identified as the appropriate analytical tool for examining Enron culture. At the end this report shows how the Kenneth Lay and Jeffery Skilling led to the downfall of Enron also provide some recommendations and

Over the past few years many changes have been made by organizations, in the way that they do business. One of these changes has been going from rigid and centralized organizations, to now taking advantage of flexible and decentralized structures. An organizational structure outlines the way the job tasks are formally divided, grouped, and coordinated. The effect a decentralized structure has on managers and employees is that, the gap between who can make the decision has been spread. With a decentralized structure the process of decision-making comes down to the manager that is closest to the action. The impact on organizational strategies has been that organizations have to adapt to the new structures to fit in to be able to compete more efficiently and effectively.

It seems like business morals and ethics are being whisked to the side in lieu of the ever growing demand of higher stock prices, rising budget goals and investor profits. Despite the increased regulation of corporations through legislation, such as, Sarbanes-Oxley, some corporations still find themselves struggling to maintain ethics and codes of conduct within the workplace. In reviewing the failings of the Enron Scandal, one can heed the mistakes that both individual and organization malaise, such as, conflicts of interest, lack of true transparency and the sever lack of moral courage from the government, executive board, senior management and others, contributed to the energy giant’s downfall.

Enron is a very much reported story and a decent case to show how ethics drives a culture that pushes ethical limits and the components of good corporate governance. On December 2, 2001, the organization filed for bankruptcy protection is the biggest case of bankruptcy in the United States. This case also, shows just how much greed and dishonesty can lead someone even an organization to go against their own mission, vision, and values. The Enron Code of Ethics and its foundational values of respect, integrity, communication, and excellence obviously did little to help create an ethical environment at the company. In this editorial, the details of Enron’s case were reviewed and the major ethical issues involved in Enron’s scandal were analyzed. After analyzing the case various ethical violations were found, also, how perceptions can lead to great loss of financial stability. In the consequences of Enron’s bankruptcy filing, numerous Enron executives were charged with criminal acts, including fraud, money laundering, and insider trading. Additionally, many top organizations lost their reputation, faced fines and lawsuit, in helping Enron cover up their dirty