Leadership Failures of Enron

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Leadership Failures of Enron

By | October 2008
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Many have heard of the Enron Scandal of 2001. A scandal, by definition, is an event that involves allegations of wrongdoing, disgrace, or moral outrage. In other words, a scandal is caused by shortcomings in ethics. Enron’s Ken Lay, Jeffrey Skilling and Andrew Fastow each engaged in unethical practices in their various leadership positions at Enron and caused thousands of Enron employees and investors to lose their savings. (Smartest)

Kenneth Lay showed all the signs of a transformational leader early in his career. Lay began as and forever remained a staunch advocate for free markets and deregulation of markets. He had a vision of a free energy market that would be more profitable than the encumbered government-regulated market. (Jelveh; Biography) Kenneth Lay made use of considerable political clout derived from his friendship with the Bush family to further his deregulation agenda. (Smartest) Lay’s vision of a deregulated market, it would seem, would cloud his ethical judgment in the future.

Lay seemed to have no trouble moving up in the business world. In 1974, he became an executive of the Florida Gas company and became president of the company in 1981. In 1982, he returned to Houston to run Transco Energy Co., and in 1984 took the helm of Houston Natural Gas. Houston Natural Gas then merged with InterNorth in 1985, and the combined company became Enron with Lay as CEO. (Biography)

The first signs of Lay's ethical shortcomings came in 1987 with what became known as the Valhalla Scandal. Lou Borget, a trader of Enron Oil Trading, was convicted of money laundering and fraud costing Enron shareholders about sixty-four million dollars. Lay testified that he was shocked by the illicit tactics used by his oil traders, but evidence, including the word of the former Enron Oil vice chairman Mike Muckleroy, seems to indicate that Lay understood what was happening the whole time. Auditors told Lay that his oil traders were manipulating...
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