Enron

Powerful Essays
Enron Case Study
A company’s leadership and culture influences its business ethics. A company’s culture is known as the organizational culture. It is the actions and beliefs of individuals that work at the company. All the shared values and enforced policies contribute to organizational culture. “The leadership culture appears as an integral part of the organizational culture and it can have a positive or negative influence upon the latter.” (Popa, 2013, p. 179). The organizational culture can go against one’s personal ethics however with toxic leadership in place the lines may blur and situations like the Enron scandal occur.
Background
Enron was the product of the merger of two gas pipeline companies in 1985. After the deregulation of energy markets, Enron became more of an energy broker and profited from the differences in the buying and selling prices of the buyers and sellers they brought together (Sims and Brinkmann, 2003). It was after this time that company began to thrive and the culture dramatically changed. During this complex changing environment was Enron leadership’s chance to decide the company’s ethical future. Enron altered their financial sheets by logging profits before they actually happened. Then they hid the debt by putting the debt in their partnership companies. “When the extent of its debt burden came to light, Enron’s credit rating fell and lenders demanded immediate payment in the sum of hundreds of millions of dollars in debt.” (Sims and Brinkmann, 2003, p. 245).
Enron’s Leadership
Enron’s “leadership created a culture that pushed the envelope, a culture that encouraged and rewarded risk taking, a culture that was fixated on the bottom line and not the ethical niceties.” (Gini, 2004, p. 11). Their business ethics were that everything was ok to do as long as it made the company money. It was an environment that put the employee’s against each other, had no accountability, and there were only consequences if



References: Barnes, C. (2007). Why Compliance Programs Fail: Economics, Ethics and the Role of Leadership. HEC Forum, 19(2), 109-123. Retrieved January 20, 2014 from ProQuest. Free, C., Macintosh, N., Stein, M. (2007). Management Controls: The Organizational Fraud Triangle of Leadership, Culture and Control in Enron. Ivey Business Journal Online. Retrieved January 20, 2014 from ProQuest. Gini, A. (2004). Business, Ethics, and Leadership in a Post Enron Era. Journal of Leadership & Organizational Studies, 11(1), 9-15. Retrieved January 20, 2014 from ProQuest. Madsen, S., Vance, C. (2009). Unlearned Lessons from the Past: an Insider’s View of Enron’s Downfall. Corporate Governance, 9(2), 216-227. Retrieved January 20, 2014 from ProQuest. Meisinger, S. (2012). Examining Organizational Ethics. Retrieved January 20, 2014 from http://www.hreonline.com/HRE/view/story.jhtml?id=533349044 Popa, B. (2013). Risks Resulting from the Discrepancy Between Organizational Culture and Leadership. Journal of Defense Resources Management, 4(1), 179-182. Retrieved January 20, 2014 from ProQuest. Sims, R., Brinkmann, J. (2003). Enron Ethics (or: Culture Matters More than Codes). Journal of Business Ethics, 45(3), 243-256. Retrieved January 20, 2014 from ProQuest.

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