The Corporate Culture Of Enron

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,

Enron’s use of informal or social control as a means of guiding employee actions contributed to its illegal actions forwarded by a pervasively negative culture and led to the ultimate downfall of the firm. In order to examine how Enron made a greater use of social control than formal control, this paper will first propose frameworks that describe what social control are formal control are. Then, it will use key details from the documentary to show how Enron’s culture fit the a framework of social control that generated its actions. Finally, the paper will discuss how formal controls were in place but, display how these formal controls were minimized and not the primary catalysts through a discussion of espoused values. These arguments will then show how Enron’s greater use of social control to direct the actions of its employees led to the bankruptcy of the company and loss of the employees’ pension and life savings.

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,

Whenever someone hears the word "Enron" today, they usually think of the transgressions committed by the top-level executives who successfully managed to destroy the company's reputation and achievements.

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.

When Skilling was hired, the staff that he motivated as being innovative and independent, used accounting loopholes and poor financial reportings to hide billions of dollars in debt from failed deals and projects. Enron looks like the perfect illustration of the bad barrel bad apple disease. Enron’s CEO Jeff Skilling, pursued a culture that would push through the limits, “Do it right, do it now and do it better.” he used to say. Skilling encouraged employers to be independent and innovative. This gave rise to the pursuit of excellence, as executives worked to develop ways of preserving Enron’s success, when they unaware they were developing its downfall.

Enron was one of the largest energy, commodities, and services company in the world. It was founded in 1985 and based in Huston, Texas. Before its bankruptcy on December 2, 2001, there are more than 20,000 staff and with claimed revenues nearly $101 billion during 2000. Enron was the rank 16 of Fortune 500 in 2000. In 2001 it revealed that Enron’s financial report was planned accounting fraud, known since as the Enron scandal. In the Enron scandal, Enron used fraudulent accounting practices to cover its fraud in reporting Enron’s financial information. Its purpose is to hide the significant liabilities from its financial statement. Enron tried to make its financial report with great revenue to attract more people to invest it. It continued to spread the information that advance its stock price continued to rise. In fact, Enron was with a large amount of liabilities and loss. The key executives of Enron continually spread the fake information of Enron’s financial report and kept encourage the people to buy its stock. They knew the real financial condition of Enron. They knew the outlook of Enron is not good, so they sold their stocks secretly to generate profit before the company bankruptcy. After the people knew that Enron had a large amount of loss, the stock price was drop from 90 dollars per share to just pennies. In addition, the bankrupt of Enron had a great effect in the California energy market. The bankrupt of Enron made California had a shortage of electricity

Enron was a business conglomerate during the 1990s, formed by the merger of smaller oil and energy companies. Houston executives Kenneth Lay (Chairman), Jeffrey Skilling (chief executive officer (CEO) and Andrew Fastow (chief financial officer (CFO) parlayed their new mega-company into a favorite Wall Street company, bragging of record profits with negligible losses. During the 1990s, the three senior executives changed Enron from a traditional gas and electricity company into a $150 billion energy corporation. For instance, from 1998 to 2000 only, Enron’s returns rose from approximately $31 billion to over $100 billion, making the company to be the seventh biggest conglomerate of the Fortune 500. Unidentified to nearly everybody, this picture was the result of one of the largest swindles in financial history (Ferrell, Fraedrich & Ferrell, 2013).

Enron was incorporated as an energy company in 1985. Headquartered in Houston, Texas, Enron was the world’s largest energy company by the end of 2001, responsible for 25% of the world’s contracts for energy trading. Enron was a strong company, holding a steady position in Fortune’s 100 best companies to work for and a sign in the company’s lobby that read “WORLD’S LEADING COMPANY”. Being an employee of Enron definitely had its perks as well. “Employees at Enron’s headquarters had access to an on-site health club, subsidized Starbucks coffee, concierge service that included massages, and car washes, all for free. Those employees with Enron Broadband received free Palm Pilots, free cell phones, and free wireless laptops” (Jennings 233). It appeared as though the company had everything going for them, but it wouldn’t be long before the company took a turn for the worse. In late 2001, “a week following credit agencies’ downgrading of its debt to ‘junk’ grade, Enron filed for bankruptcy,” the largest recorded bankruptcy in the United States ($62 billion) at that time (Jennings 233).

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 Corporation began as a small natural gas distributor and, over the course of 15 years, grew to become the seventh largest company in the United States. Soon after the federal deregulation of natural gas pipelines in 1985, Enron was born by the merging of Houston Natural Gas and InterNorth, a Nebraska pipeline company. Initially, Enron was merely involved in the distribution of gas, but it later became a market maker in facilitating the buying and selling of futures of natural gas, electricity, broadband, and other products. However, Enron’s continuous growth eventually came to an end as a complicated financial statement, fraud, and multiple scandals sent Enron through a downward spiral to bankruptcy.

Enron started out as a dominant culture. Kenneth Lay and Jeffrey Skilling had a vision of how they wanted the company to be and where they wanted it to go. When Lay put Skilling in charge, he made it his mission to hire the best traders, recruiting them from the best schools and other companies. They gave employees corporate rewards like concierge services and a company gym. As the company grew larger, the culture began to take a turn for the worse. Enron demonstrated a few cultural dimensions such as high risk-taking, outcome orientation, and aggressiveness. Skilling established the Performance Review Committee which was an extremely harsh ranking system. It was

The Enron Jeffrey Skilling and Ken Lay knew was one they kept to themselves and a few chosen colleagues. The rest of the world saw a global oil company on the cutting edge of its business and paving a path that other American firms could follow. In its trail, investors were getting rich, employees found reward and satisfaction, and the community it called home thought it to be a model citizen and stalwart of its corporate skyline. But the truth was that the Enron Skilling and Lay knew was a fragile combination of slippery investments, shoddy book keeping, disrespect for the law, a lack of personal integrity and accountability, false communications to the public, and poor ethical management. All this was concealed by a leadership culture that seemed to believe they were either too smart to get caught or too important to be questioned. Enron and its executives paved a path that took them from a small oil company to a global leader to bankruptcy court and now many of its former executives sit in federal prison cells 13 years after the company’s tumultuous downfall. The lessons of the self-inflicted largesse from Enron are many but the one that glares from its core is that honesty and integrity need to hold a firm place at the center of a company’s business philosophies or it may quickly find a rocky path to its own end.

As Enron’s reputation with the outside world grew, the internal culture apparently began to take a darker tone. Skilling