The Enron Of Enron's Bankruptcy

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.

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

several actions that led to Enron’s bankruptcy. The issues were with the accounting method used as well as the negligence in the methodology of the company’s administration. Although once upon a time it was at its best, but gradually due to mismanagement, lack of sufficient business, improper business strategies and greed of the employees and the leadership all together became the reason for Enron’s bankruptcy. Under the section of Federal Bankruptcy Code, giant companies seek financial protection. Even it allows the company to protect itself from such threats, still all of the above were neglected by Enron Corporation.

Enron, a once thriving Houston-based energy titan, is now reduced to a cautionary adage among Americans to what massive failure corporate greed could lead to. At its core however Enron’s ethical and moral behavior was sound and seemed to be aligned with industry competitors. In an opening statement to the Enron Code of Ethics issued in July 2000, Lay wrote: “As officers and employees of Enron Corp., its subsidiaries, and its affiliated companies, we are responsible

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

Enron could become an “energy broker” in lieu of company delivering energy with the deregulation of electrical power in 1988. “Deregulation allowed Enron to be creative – for the first time, a company that had been required to “operate within the lines” could innovate and test limits.” (Sims and Brinkmann 2003) Enron went from a company with humble beginnings that has faced difficult years to an organization “where a handful of highly paid executives were able to pocket millions…” (Sims and Brinkmann 2003) With deregulation and the use of mark-to-market accounting Enron was able to legally make millions while being unethical.

The entire downfall of the giant Enron was brought about due to various ethical lapses that, in the end, would muddy the reputation of anyone who had a connection with the company. Even according to Gibney (2005), it was widely known that Enron’s CFO Andy Fastow would tend to implement and use less than ethical financial practices. The unethical behavior, though, does not usually just occur with one person or one position. Gibney (2005), throughout the entire documentary, hints at the idea that all Enron management/leadership knew of and were complicit in the unethical practices. In the end, Enron had betrayed the trust of thousands of employees and investors. Both of these betrayed parties would try to seek some level of justice in what had become one of America’s worst economic blunders (Gibney, 2005).

This paper explores the ethical dimension of the demise of Enron Corporation an reflection of author, placed in hypothetical situations. Accounting Fraud and Management philosophy will be the main discussion topics, along with the motivations of fraud. The fall of Enron can be directly attributed to a violation of ethical standards in business. This makes Enron unique in corporate history for the same actions that made Enron on of the fastest growing and most profitable corporations, at the turn of the 21st century, also bout about its destruction. This paper does not explore legal consequences, only the ethical dimension of Enron’s actions.

In today’s society, a business can be heavily influenced by the head of the company. The owners can make or break the business. A business is usually modeled around the beliefs of the leader. The way a business operates is determined by the leader. A lot of the time, this can lead to a business success of failure. Corporate leaders are critical to a company's success because they influence the company's morals, work ethic, and customer base.

This shows the fact that leaders are lack of expert power and incapable of utilizing their knowledge and skills for making appropriate decisions. The poor management practices have also become the sound reason of the collapse of the company and misuse of leadership power (Vera, D., & Crosan, M., 2004). Leadership is the process of influencing individuals while playing an important role in the attainment of organizational goals through the development of environment within an organization to direct the attitude of employees and behavior. The authoritative and centralized power to the CEO has also threatened the process of empowering employees and gets improvement in their work performance that eventually led to the collapse of the organization. Moreover, lack of understanding the changing trends of market is also depicting the lack of use of expert skills by the leaders of the company. For instance, management took most of financial investment decisions at the time of market turmoil that led to the collapse of the

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

Beyond the dollars and cents, the Enron catastrophe offers a new textbook example of failed ethics in business. Individuals are responsible for their actions; unethical or illegal individual actions are systems of systemic problems, and Enron’s system of accountability, oversight, ethical disclosure and corporate concerns were flawed. The corporate culture at Enron exemplified values of risk taking, aggressive growth, and entrepreneurial creativity. Although these can be positive values, they were not balanced by genuine attention to corporate integrity and value. Since the culture at Enron was not well

Although the demand for leaders who exhibit ethical behavior is growing, there is substantial debate concerning the concept of ethical leadership (Yukl, 2013). Definitions of ethical leadership often incorporate ideas of integrity and trustworthiness, which also have various definitions. Because of the diverse perceptions of what constitutes ethical behavior, there are multiple dilemmas that must be considered. Individuals must also consider difficulties and consequences of ethical leadership. Several theories have been postulated to explain different types of leadership ideas that seek to encourage ethical behavior. In addition, guidelines have been proposed encourage ethical leadership. When leaders perform in an unethical manner, the consequences can be far reaching; Enron is an example of the devastation unethical practices can create (Yukl, 2013).

Enron had been the darling of corporate America: it was voted its most innovative company, adviser to US Government, a Fortune 500 top ten player, backed by the world’s biggest banks and rated by the top market analysts (Tonge, Greer, & Lawton, 2003). While it is shocking to hear about ethical scandals from big corporations, this paper discusses the major reasons and lessons learnt from Enron’s scandal. Enron’s scandal wasn’t caused by few “bad apples” but the organization’s culture, as set by Enron’s leadership, was the main driving force toward unethical behavior (Kulik, O 'Fallon & Salimath, 2008). However, it didn’t take one party to destroy this great structure; many parties were responsible for it starting with its leadership, then its auditors, and the entire US financial system that consequently learnt the lesson and have made major changes that seem to be effective nevertheless continuous follow up and close monitoring is still necessary to avoid having another Enron in the future.

Most of the world has heard of Enron, the American, mega-energy company that “cooked their books” ( ) and cost their investors billions of dollars in lost earnings and retirement funds. While much of the controversy surrounding the Enron scandal focused on the losses of investors, unethical practices of executives and questionable accounting tactics, there were many others within close proximity to the turmoil. It begs the question- who was really at fault and what has been done to prevent it from happening again?