How Might Theories of Leadership and Group Identity Help to Explain the Enron Collapse?

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How might theories of leadership and group identity help to explain the Enron collapse?

Leadership means to motivate, influence and enable others to helps contribute towards the sucess of the organisation. The leadership of a company is one of the biggest reasons why a company will either fail or suceed. The leadership is the reason why Enron as a company failed, the leaders were inside trading with the companies stock shares for almost 10 years, which caused them to lose over 11 billion dollars, this caused the stocks to drop from $90(2000 's) to less that $1 by the end of november 2001, in the end this caused Enron to file for bankruptcy. Enrons $63.4 billion in assests caused it to become the largest corporate bankruptcy as the time. The leaders mainly involved with this were Jeffrey Skilling and Kenneth Lay who both caused their own problems within the company. I am going to explain the Enron collapse focusing on theories and group identitfy.
There are five primary mechanisms that leaders are able to use to influence a organisations culture according to Schein (Schein 2004). These are attention, reaction to crises, role modeling, allocation of rewards and criteria for selection and dismissal Schein says that these mechanisms encourage behavorial and cutural normals within a organisation. The first of the mechanisms – attention, this is because what ever catches the attention of the leader will become the leaders focus and what ever becomes the leaders focus will become the entire companies focus. The next is reaction to crisis, this is because in a crisis people will react in two ways – keep it to themselfs or look for help, in a crisis a leaders actions are to be taken as a more clear view of who they really are. Role modeling is important as employees will follow a leaders actions closer than they will their words so it is important that a leader acts how he wants his followers to act. The next is allocation of rewards, this is when people are praised for



References: Edgar H. Schein (2004). Organizational culture and leadership. San Francisco: Jossey-Bass Robert Jon Peterson . (2012). Enron Case Study. Available: http://www.sophia.org/enron-case-study-tutorial. Last accessed 03/02/2013. Clinton Free, Mitchell Stein, Normal Macintosh. (2007). MANAGEMENT CONTROLS: THE ORGANIZATIONAL FRAUD TRIANGLE OF LEADERSHIP, CULTURE AND CONTROL IN ENRON. Available: http://www.iveybusinessjournal.com/topics/the-organization/management-controls-the-organizational-fraud-triangle-of-leadership-culture-and-control-in-enron#.URSWleQ027V. Last accessed 03/02/2013. N/a. Enron: What Caused the Ethical Collapse?. Available: http://academic.cengage.com/resource_uploads/downloads/0324589735_170401.doc. Last accessed 03/02/2013. John Greenwald. (2001). Rank and Fire. Available: http://www.time.com/time/business/article/0,8599,129988,00.html. Last accessed 03/02/2013.

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