Relationship between Strategic Management and Leadership

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Learning Outcomes and Assessment Feedback

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LO 1

Understand the relationship between strategic management and leadership 1.1 Explain the link between strategic management and leadership

1.2 Analyze the impact of management and leadership styles on strategic decisions  

1.3 Evaluate how leadership styles can be adapted to different situations  
LO 2

 
Be able to apply management and leadership theory to support organizational direction 2.1 review the impact that selected theories of management and leadership have on organizational strategy

2.2 create a leadership strategy that supports organizational direction  
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Contents

Contents2
Executive Summary3
The Corporate Culture 5
The Leadership of Kenneth Lay5
Contributing Factors for Enron’s Debacle7
Power Abuse7
Fraudulent Accounting Practices7
Employees and Board members8
Investors Grief9
Auditors and external regulatory agency9
Conclusion9
The debacle of Enron, led not only the company to bankruptcy but also its employees and shareholders. Unethical leadership and vested interests played a significant role in its imminent failure. Very few had the courage to challenge authority and leave when faced with ethical violations. No member of the firm had the courage to report the misbehavior of Lay and other executives to the attention of the public before the crisis erupted (Cruver, 2002). Enron’s board also disregarded the fact of Arthur Anderson, who served as auditor and consultant to Enron did not discourage them from carrying out fraudulent activities and practices. 9 References10

Executive Summary

In the winter of 2001 just about 2 weeks before Christmas, American energy giants, Enron filed for bankruptcy, history remembers that fateful day of December 2nd that destroyed the financial positions of many who banked on it through stocks and shares and most of all through employment. The scandal was of such a significant nature that it led to de facto dissolution of Arthur Anderson, a credible auditing firm at that time. Enron, was burdened under massive debts largely due to its fraudulent accounting and unethical practices that required the company to use accounting limitations to misrepresent earnings and modify the balance sheet to indicate favorable performance, thus maintaining the credibility of the company.

The core objectives of this case study includes examination of the unethical practices and leadership adopted by the top executives namely Kenneth Lay the CEO (Chief Executive Officer) and Jeffery Skilling the CFO (Chief Financial Officer) of Enron that significantly contributed to the debacle of this giant powerhouse. Furthermore it examines practices like the mark to market accounting, the creation of SPE (Special Purpose Entity) and also the role played by auditing firm Arthur Anderson who was the auditor and consultant to the firm, a serious conflict of interest as concurred by many industry sources.

An attempt is also made to provide an independent point of view based on recommendation from Thompson on how ethical leadership if implemented by the top executives, the board and to some extent the regulatory bodies that could have saved Enron from an imminent downfall.

Something is rotten with the state of Enron.
—The New York Times, Sept 9, 2001

Introduction

A brief visit to history reveals that Enron was founded by Kenneth Lay by way of merger of two natural gas pipeline companies, namely The Houston Gas Company and the Inter North Inc in the year 1985, back then, the primary business for Enron was to operate as a natural gas trading company, but the deregulation of natural gas pipe lines meant great...
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