Analysis of Enron

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  • Topic: Enron, Kenneth Lay, Jeffrey Skilling
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“What Went Wrong at Enron?”

Trident University International
Phillip M. Cherry

Module 5 Case Assignment
ETH 501: Business Ethics
Dr. Michael Garmon
March 1, 2012
3/1/2012

Introduction
In this paper I will provide a critical evaluation of the Corporate Culture at Enron, explain how the business ethics and operations were influenced by the corporate culture, and what went wrong. In addition, I will describe what leadership’s roles and responsibilities were, how key leaders worked to negatively reshape the culture, and the adverse consequences as a result of their behavior. Lastly, I will discuss how Human Resource Management could have impacted the “moral compass” at Enron and affected a positive outcome. Let’s begin by looking at the events leading up to the formation of Enron. The Creation of Enron

Willis Straus had been a long time chairman of InterNorth Corporation and was characterized as beloved, a father figure, who was powerful, but not arrogant (Madsen & Vance, 2009). It is a shame he did not stay on in some capacity after the merger with Houston Natural Gas which gave birth to Enron. He sounds like the type of leader that took a page out of the British Empire’s book on business. In the old days of the British Empire managing agents conducted business in a “gentlemanly” way. Confidence and collaboration rather than cutthroat competition marked their doings (Stadler, 2010). Strauss had created an egalitarian corporate culture, where honesty, integrity, and compassion mattered. Unfortunately, Will Strauss left, Sam Segnar took over, and this is as we will see was the beginning of Enron’s demise. Segnar was the exact opposite of Strauss, although it did not matter since he was not chairman for long after the merger was complete. Ken Ley was the chairman of Houston Natural Gas, and it did not take him long to attract other board members to his side which led to the ousting of Segnar and his ascension to chairman. Ken Lay was a “snake in the grass” with an ulterior motive for every action he took, and did not seem concerned with ethical business behavior. Ken Lay was no Willis Strauss either, and he immediately invoked a 180 degree change of course at Enron. Ken Lay: Change Agent or Master of Disaster

Lay took a company with humble beginnings and facilitated a drastic cultural metamorphosis. As we learned from the WorldCom debacle, if mergers and acquisitions are not handled properly the consequences can be disastrous. Enron would prove to be no different. I would not characterize Ken Lay as a compassionate, humble, and patient man. On the contrary, he was egotistical, impatient, and self-centered. Unfortunately, those are not the characteristics needed to execute a successful merger. He knew what he wanted, and he wanted it right now. Instant gratification was his mantra. Many people believed he was a visionary, however I submit his vision did not extend beyond the length of his arm when reaching for his wallet. He liked to spend money, but I find this is ironic since he grew up poor as the son of a Baptist minister who had a basic understanding of ethics (Madsen & Vance, 2009). Obviously, something changed in his psyche. He was so fanatical and obsessed with making money it distorted his perception of reality. He needed help to satisfy his addiction to money, so Lay brought Jeff Skilling on board. Skilling was singing Ken Lay’s song; let’s make a lot of money, make it quick, and bend, or break whatever rules or laws we have to. This total disregard for established procedures, and win at all costs mentality led to his rapid ascent to President and CEO. Out with the old and in with the new

Ken Lay, Jeff Skilling, and Andrew Fastow, the Chief Financial Officer, liked to shake things up. Once the deregulation of the electrical markets took effect it allowed Enron to innovate, test the limits, and its contracts...
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