The Collapse of Enron and How It Relates to Organizational Behavior

The collapse of Enron is perhaps one of this century’s biggest and memorable scandals of this century so far. Created in 1985 through the merger of two natural gas companies, the Houston-based company was considered one of the most successful and powerful companies throughout the 90s. In 2001, Enron’s world came crashing down as the company was forced to reveal that it had defrauded people out of millions of dollars. Those hurt mostly by the collapse of Enron were the workers, whose loyalty and hard work were rewarded with now useless stock options. Within minutes, thousands of people had lost their life savings because the top executives were lining their pockets with Enron’s losses. The following discussion will show how the leadership, management and organizational structures contributed to the failure of this American conglomerate and how it could have possibly been avoided. Working as part of the management team does not necessarily mean the manager is a leader. In the case of Enron, however, Ken Lay and Jeffery Skilling were considered successful leaders and great managers. Ken Lay, who helped found Enron in 1985, used proceeds from junk bonds to buy another natural gas pipeline, combine it with his company, Houston Natural Gas and created a company which from the beginning, wanted to be more than just a gas company that transported and sold gas ("The History Of Enron", 2011). Lay had visions of his newly formed company becoming a big player in futures contracts, now that energy markets were deregulating. Lay hired Skilling to run Enron Finance Corp. and Skilling would eventually become president and Chief Operating Officer at Enron. Under these two leaders, Enron opened doors into new markets—in some cases creating those markets itself. According to "The History Of Enron" (2011), Enron not only traded energy contracts, but “industrial commodities such as steel and wood fiber, financial derivatives such as default insurance, and such innovative items as

References: Booth Thomas, K., Fonda, D., Pappalardo, J. & Thotta, J. (2002, February). Enron takes a life. Time Magazine. Retrieved from http://www.time.com/time/magazine/article/0,9171,1001771-2,00,html Pellegrini, F. (2002, January). Person of the Week: Enron ‘Whistle Blower’ Sherron Watkins. Time Magazine. Retrieved from http://www.time.com/time/nation/article/0,8599,194927,00.html The history of Enron. (2011). Retrieved from http://www.npr.org/news/specials/enron/history.html