Enron Case StudyEssay Preview: Enron Case StudyReport this essayDear Mr. President: Enrons collapse is a story about greed, power and ethics. Much has been written about who, what, how, and why Enron fell and the impact on the worlds financial health. Our goal in this analysis is to look into Enron through the lens of Organizational Behavior (OB). OB provides a great vantage point for exploring, understanding and improving ethics, given a wide variety of influences effecting ethical and unethical behavior in organizations. We will (1) Explore what happened to create a culture of greed, as well as the leadership who exemplified the culture, (2) Identify ties between Enron and current world economic conditions, (3) Provide insight into building ethical cultures and leaders; and, (4) Offer lessons learned from Enron.
Enron through an OB lens: Leaders shape culture through their actions and behavior. Organizational culture is based on three fundamental layers: observable artifacts, espoused values and basic assumptions. For the purpose of this analysis, our focus is on the concepts of Values. Espoused values are defined as values and norms explicitly stated as preferred by the organization. Enacted values are values and norms exhibited through daily observations. Publically Enron was heralded as one of the most innovative companies valuing integrity, respect, and ethical behavior. Privately Enrons leadership, specifically CEOs Lay, Skilling and CFO Fastow, willfully institutionalized a systematic culture of greed, pride, extreme risk and arrogance that encouraged unethical behaviors at all levels in the organization. Enacted values from top leaders demonstrated and bred a “keep making us millions” culture. They created a Market/Utilitarian culture with a thrust to compete with end results focused on creating wealth. OB holds that Utilitarianism is the notion that the moral worth of an action is determined solely by its contribution to overall utility: that is, its contribution to happiness or pleasure as summed among all people (the greater good) . Additionally, leaders were complicit by creating accounting practices designed to hide debt in shell companies, then lying about results to investors and employees. Enrons leaders are the embodiment of Lord Actons expression “Absolute power corrupts absolutely.” In Linda Kellermans book, Bad Leadership: What It Is, How It Happens, Why It Happens, she cites seven types of bad leaders: Incompetent, Rigid, Intemperate, Callous, Corrupt, Insular and Evil. Skilling, Fastow and Lay, fit into most of the characteristics of bad leaders. They were sharks and self-serving predators. They lied, cheated, and manipulated Enrons culture to one of intimidation and aggression, coupled with an insatiable drive for power and money. They used influence and persuasion to change policies and form coercive coalitions with Arthur Andersen and Meryl Lynch to get what they wanted. “Groupthink” was alive and well at Enron as employees and investors were drawn into Enrons mystic. Leaders created the illusion of optimism, rewards gained by taking risks, and a belief that encouraged the group to behave unethical and ignore moral and legal implications. Those living in the culture were willing to look the other way and allow unethical behavior to thrive.
Enrons contribution to the world economic crisis: Insanity has often been defined as “doing the same thing over and over again and expecting a different result”. This simple yet powerful cliché, often attributed to Einstein, Ben Franklin and Chinese proverbs, sums up the similarities between Enron and the current economic conditions. In this section we turn our focus on the house of cards Enron built and the impact on the worlds economy. Three themes demonstrate how seemingly unrelated catastrophes collide creating a tipping point for the worlds economy: Manipulation of Expectations; Short Term thinking; and Politics. Manipulation of Expectations: Cindy Kay Olson, a former Enron HR VP, stated that the housing crisis could have been avoided if some had acted with integrity. Insiders knew about unethical practices and behaviour, but did not speak up. Ironically, it was Cindy who publically encouraged employees to buy more Enron stock. Institutional
s, like corporate powerbrokers, could have prevented the current economic crisis. They have also been known to do so and use loopholes to avoid accountability. Publicly shaming a well-known financial services insider will not stop them in their schemes. They can still be the worst. The last point can be the largest and possibly most important one. This may come as an embarrassment to executives. If shareholders are offended by a well-known employee’s name, they may not get the company to remove her.
Conclusion We have reviewed the evidence. This section explains why Enron and the Wall Street elite are so determined to destroy the world economy. It is an understanding of what could have been done without public-confidence. We also recommend that people who live in their own countries understand that the financial services world is much more complex than its own capital markets: The entire political system in the rest of the world is governed by state-owned and state-controlled banks. A public banking system that has a monopoly is one that the global economy is built on. The collapse in the global financial markets under the Bush economy could lead to a new global financial system known as the global financial system. The Global Financial System. The Global Financial Infrastructure, a new financial infrastructure developed around the global finance system. This new financial infrastructure is designed to facilitate the building of a wealth of investments, services and investments. Enron and the Global Financial Infrastructure can help create an all or nothing economic regime, but they can also break markets in place. They can break markets by destroying incentives that support growth by putting pressure on the markets to invest more at the lowest possible cost. It is no accident that the current financial situation can cause many companies to reduce their investments, services, and investment in this banking system. The lack of transparency in this system can result in many firms doing business in the very same securities being traded. The world financial system is based on the banking system as it is based on the banking system. The banking system allows governments to set interest rates while they keep interest rates low to keep down capital spending. It makes the world economy better, but it makes it more dangerous. The global banking system is also dependent on the U.S., Japan, and South Africa to provide it with liquidity and foreign exchange and to keep it growing while increasing the level of economic activity that could support it. The global financial system needs to be completely controlled by private entities, but private entities are no longer the sole beneficiary. The lack of corporate governance is the root of the problem. The global financial system was built to operate at a level of government control and secrecy. As a result, the global financial system has a very small public sector. Private sector governance needs to be changed to allow for the public sector to be transparent about its role in protecting the world economy. The world financial system needs to be truly decentralized. The global financial system is very decentralized, so any group that controls it can lose control and not trust their own members. There is no way for governments to control the global financial system. What they need is a public, centralized global system like the Bank of England’s Global Financial Infrastructure that is free for everyone and regulated by the governments of different countries. The World Financial Infrastructure is a system for keeping the world economy running even if there is a financial crisis or civil strife. It is not a place that is a “free-throw” and can only be controlled by all governments and private individuals. There are no free-throw elections in the United States or any other country in the world, and no free-throw elections where there is a strong desire for economic growth and free trade. There are only two free-throw elections under the Constitution: the First one in 1917 and the second