Business
How might theories of leadership and group identity help to explain the Enron collapse?
The following essay will look at how leadership and group identity might explain the Enron collapse, a multibillion company established in 1985 after the merge of Houston Natural Gas and Inter-North, with a reported fortune of over US $100 billion in 2000 and at number 7 as the most successful company in America (Fox, 2003). Huczynski and Buchanan (2010 P 596) points out that an effective organisation is one that practices good leadership and Zaleznik (1992 P 126) identifies some of the key leadership points such as; good managerial culture, emphasising rationality and control, the question is did any of this exist in Enron?
Most people argue that Enron CEO (Kenneth Lay) was a charismatic leader, for building his company from scratch to success before its collapse. Maybe the success that his company had over the years made him offer radical decision about the future, which did not serve the company any good but led to its failure. Such leaders believe they have a gift to inspire employees to work harder and gain the confidence of investors. According to Khurana (2002, PP, 60-65) that is not a gift but rather a curse to the leaders who think they are superstars. Enron leaders overlooked plenty of things, as such they destabilised the organisation in a dangerous way.
Yukl (2010, P, 129) says that, 'some leaders suffer from the tendency to look for simple answers to complex questions ', for example the audit committee of Enron board, none of them had the incentive to bring out the truth about the financial dilemma or mismanagement. Among them Arthur Anderson failed to report the accurate information because of a conflict of interest between the auditing and consulting activity for Enron, Andersen’s income from consulting for Enron was twice of audit incomes (Harshbarger S 2002). Enron cover up meant that, Even the simplest of the matter became so complicated. According
The following essay will look at how leadership and group identity might explain the Enron collapse, a multibillion company established in 1985 after the merge of Houston Natural Gas and Inter-North, with a reported fortune of over US $100 billion in 2000 and at number 7 as the most successful company in America (Fox, 2003). Huczynski and Buchanan (2010 P 596) points out that an effective organisation is one that practices good leadership and Zaleznik (1992 P 126) identifies some of the key leadership points such as; good managerial culture, emphasising rationality and control, the question is did any of this exist in Enron?
Most people argue that Enron CEO (Kenneth Lay) was a charismatic leader, for building his company from scratch to success before its collapse. Maybe the success that his company had over the years made him offer radical decision about the future, which did not serve the company any good but led to its failure. Such leaders believe they have a gift to inspire employees to work harder and gain the confidence of investors. According to Khurana (2002, PP, 60-65) that is not a gift but rather a curse to the leaders who think they are superstars. Enron leaders overlooked plenty of things, as such they destabilised the organisation in a dangerous way.
Yukl (2010, P, 129) says that, 'some leaders suffer from the tendency to look for simple answers to complex questions ', for example the audit committee of Enron board, none of them had the incentive to bring out the truth about the financial dilemma or mismanagement. Among them Arthur Anderson failed to report the accurate information because of a conflict of interest between the auditing and consulting activity for Enron, Andersen’s income from consulting for Enron was twice of audit incomes (Harshbarger S 2002). Enron cover up meant that, Even the simplest of the matter became so complicated. According
Bibliography: Hutton W (2004) The world we are in, Abacus, London. Judge T.A, Bono J.Y, Ilies R and Gerhardt, M.W (2002) Personality and Leadership: A qualitative and quantitative review: journal of applied psychology (87), 765-780. Sternberg E (1998) Corporate governance: Accountability in the market place, Institute of Economic Affairs, London. Watkins S. (2003a) Former Enron Vice President Sherron Watkins on the Enron collapse. Academy of Management Executive, (2003) 119-125. Watkins S. (2003b) Ethical conflicts at Enron: Moral responsibility in corporate capitalism. California Management Review, (45) 6-19. Wearing R (2005) Cases in corporate Governance, Sage, London.