Enrone Leadership failure

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EXACUTIVE SUMMARY……………………………………………………………...14 INTRODUCTION …………...………………………………………………………15-16 THE ENRON HISTORY…………………………………………………………….17-18 THE ENRON CULTURE ……………………………………………………………….19 LEADERSHIP FAILURE ………….. ………………………………………………20-21 LEADERSHIP DISCUSSION ………………………………………………………22-25 CONCLUSION…………………………………………………………………………..26 REFERENCES ………………………………………………………………………….27

ENRONE: Failure of Leadership

Executive Summary
Enron stands out as one of the biggest failures in business history. In 2001, Americans were appalled to learn of the unethical practices carried out by leaders and other employees of Enron. Enron used various methods of deception to appear more profitable than it really was, including through creating off-the-book entities to which Enron transferred its substantial debt. (Jennings, 2005). Enron implosion took the world capital markets and Shake the investor confidence in accounting and financial reporting. It even caused the world’s renowned international accounting firm Arthur Andersen to collapse. The most important gatekeeper could not predict Enron’s collapse before it occurred. It was then discovered that Enron senior management had employed complex creative accounting techniques to manipulate the company’s financial figures and hence boost up the financial performance. (Cruver, July 2002) This essay explores the internal culture and leadership practices of its top management. It includes a particular emphasis on charismatic leadership, in people like Kenneth Lay and Jeffrey Skilling. The compelling vision of these leaders, expressed in a recruitment system designed to activate a process of conversion and the promotion of culture by conformity and penalizing of dissent.

Introduction
Enron went bankrupt and disappeared thirteen years ago, the impacts it has made on the ethical standards never faded. It took Enron 16 years to go from about ten billion dollar assets to more than sixty-five billion dollar assets, and took twenty-four days to go bankrupt. (Mclean, 2004) Enron, which once ranked as the seventh-largest company on the Fortune 500 and ranked as the sixth-largest energy company in the world, on December 2, 2001, filed for bankruptcy protection in the biggest case of bankruptcy in the United States up to that point. By November 2001, the company’s stock, which once peaked at $90, was down to less than $1. It was a disaster for the thousands of employees and investors. Employees lost their jobs and pensions, and investors lost billions of dollars. (Enron: The Smartest Guys in the Room, 2005) Enron’s ethics code was based on respect, integrity, communication, and excellence.

Respect. We treat others, as we would like to be treated ourselves. We do not tolerate abusive or disrespectful treatment. Ruthlessness, callousness and arrogance do not belong here. (chairman, 2000) Integrity. We work with customers and prospects openly, honestly and sincerely. When we say we will do something, we will do it; when we say we cannot or will not do something, then we won’t do it. (chairman, 2000) Communication. We have an obligation to communicate. Here we take the time to talk with one another and to listen. We believe that information is meant to move and that information moves people. (chairman, 2000) Excellence. We are satisfied with nothing less than the very best in everything we do. We will continue to raise the bar for everyone. The great fun here will be for all of us to discover just how good we can really be (chairman, 2000)

As per this code of conduct and Ken Lay’s professed commitment to business ethics, how could Enron have collapsed so dramatically, going from reported revenues of $101 billion in 2000 and approximately $140 billion during the first three quarters of 2001 to declaring bankruptcy in December 2001? The answer to this question seems to be rooted in a combination of the failure of top leadership, a...
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