Leadership Case Study

Topics: Enron, Business ethics, Ethics Pages: 5 (1541 words) Published: April 20, 2011

Leadership Case Study
Susan Walters
Grand Canyon University

Enron’s corporate culture and unethical leadership led to its demise. Schuler (2002) writes that individuals are responsible for their actions regardless if they are symptoms of a systematic problem. He goes on to describe Enron’s corporate leadership and culture exemplified values of risk taking, aggressive growth, and entrepreneurial creativity, all good traits but then Enron became arrogant. Schuler (2002) points out that eventually risk taking and creativity lead to aggressive partnership arrangements, unethical dealings in the market, and abusive in their levels of greed and deception. This kind of cultural climate eventually killed Enron.

A Fortune survey named Enron “The Most Innovative Company in America,” an apt description, for the fifth year in a row. It was also ranked number 24 among the “100 Best Companies to Work for in America,” and the Energy Financial Group ranked Enron the sixth largest energy company in the world based on market capitalization (Clayton, Scoggins, and Westley, 2002). Enron’s demise was a result of unethical issues, filled with warning signs and behaviors. Pelletier and Bligh (2008) described many of the unethical practices of the Enron including, unethical decision making as a function of hierarchy, lack of ethical behavior modeling, hypocrisy, and distrust of top leaders and elected officials. Pelletier and Bligh (2008) goes on with examples of organizational politics, including nepotism and cronyism, giving preferential treatment, typically in hiring, or promotion actions of relatives, spouses, or members of the in-group. Furthermore, the old boy network, which comprised primarily of men functioning to promote and protect male’s interests in the top leadership of the organization. These men received perks simply by being members of the male network. In contrast, Pelletier and Bligh (2008) points out that lower employees had received justice evaluations with judgments about the fairness of punishment distributions with punishments that did not fit the crime, or, punishment was not rendered for the ethical infraction. This led lower employees to have emotional reactions of cynicism attitude characterized by anger, moral outrage, frustration, disillusionment, and contempt directed to the organization, its practices, and its leaders (Pelletier and Bligh, 2008). Pessimism, lack of faith about the success of the organizations continued, ethics interventions or the ability of its leaders to change and belief that ethical conduct will punished indication employees felt uncomfortable discussing ethical dilemmas with their leaders. The driving force behind the failure, Culpak and Trussel (2005) find was an approach to ignore the irresponsible use of power when the innovative culture used incentives that established an unethical alliance of a pure agency relationship between a firm's ownership and top management.

Enron has many good traits of leadership in the beginning such as values of risk taking, aggressive growth, and entrepreneurial creativity. Kulik (2002) describes what corporate executives that positively influence organization-wide ethical conduct. He points out that ethical literature is replete with suggestions, including hiring employees that are ethically oriented, establish a code of ethics while promoting an ethical culture, developing employees internally, and taking a stewardship perspective. Kulik (2002) wrote that if Enron’s top management has implemented the above suggestions, then their ethical shortcomings and bankruptcy would have been averted.

Could have this role of negativity and failure have a changed outcome? Kulik (2005) speculates that if the company turned to four possible antidotes to change an agency culture, it would include selection, objectivist integrity, integrity capacity, and stewardship. Future direction and planning for making these...

References: Behr, P. and Hilzenrath, D. (2002). Top executives blamed in Enron 's fall: Internal investigation details failure to supervise partnerships. Washington Post. Retrieved on May 3, 2009 from Washingtonpost.com.
Clayton, R., Scroggins, W., and Westley, C. (2002). Enron: Market exploitation and correction. Financial Decisions 1. Retrieved on May 3, 2009 from financialdecisionsonline.org.
Culpan, R. and Trussel, J. (2005). Applying the agency and stakeholder theories to the Enron debacle: An ethical perspective. Business & Society Review,110(1),59-76. Retrieved on May 1, 2009 from Ebsco database.
Department of Finance, Economics and Schuler, A. J., (2002). Enron’s corporate culture: Does corporate culture matter? AJ Schuler Solutions. Retrieved on May 3, 2009 from ajschuler.com.
Gudikunst, A. (2002) Enron a study of failures. A Bryant University Publication. Retrieved on May 3, 2009 from Bryant.edu.
Kulik, B. (2005). Agency theory, reasoning and culture at Enron: In search of a solution. Journal of Business Ethics, 59(4), 47-360. Retrieved on May 1, 2009 from Ebsco database.
Pelletier, K. and Bligh, M. (2008).The aftermath of organizational corruption: Employee attributions and emotional reactions. Journal of Business Ethics, 80(4) 823-844. Retrieved on April 27, 2009 from Ebsco database.
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