Schuler (2002) points out that eventually risk taking and creativity lead to aggressive partnership arrangements, unethical dealings in the market, ND 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, Cosigns, and Wesley, 2002).
Enron’s demise was a result of unethical issues, filled with warning signs and behaviors. Paltrier and Blight 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. Paltrier and Blight (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, Paltrier and Blight (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 (Paltrier and Blight, 2008). Pessimism, lack of faith about the success of he 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, Culpa and Trusses (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. Kulak (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. Kulak (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?
Kulak 2005) speculates that if the company turned to four possible antidotes to change an agency culture, it would include selection, objectivism integrity, integrity capacity, and stewardship. Future direction and planning for making these approaches implement able so that in the future the emergence of agency culture might be based on ethical decisions. In short, we need to develop answers to a strong agency culture that functions in a munificent, few-failure environment containing new hires with high ethical characteristics.
In addition, Paltrier and Blight (2008) comments that ethical leaders must be trained to avoid asking statements that are potentially perceived as hypocritical or disingenuous from employees in order to gain vantage points to regain credibility and trust. In other words, leaders must model ethical behavior both in word and deed and should very visibly encourage, support, and role model ethical inquiry at every level of the organization Paltrier and Blight, 2008). Studding’s (2002) stated Enron’s executive leadership team, Lay-Shilling-Fast, trying to create a business enterprise, which would deliver increasing wealth for their shareholders.
However, in reality, the economics of the firm was less than that sired or necessary to support a growing stock price, therefore they found it necessary to apply aggressive accounting methods to achieve the desired effect and maintain their accountability. Sulkiness (2002) wrote: To the extent that the new business ventures undertaken required continuously increasing amounts of new capital, the executive team relied on other creative mechanisms and accounting to bring in new debt capital, but to do it in a way that would not make the firm look to be more risky to the new capital investors.
Once started down a slippery hill, the need to continue these types of activities simply increased in each succeeding year. They wanted to keep their jobs, personal wealth and public acclaim, which meant keeping Enron moving forward by any means. Narcissism, Rice (2007) explained that nation’s top executives that are now accused of fraud did not have set out initially to break the law.
What’s more likely happened is that they became lost in a narcissistic fog in which they imagined that they were above the law that the rules no longer applied to people as grand as they were. Rice (2007) goes on to explain that narcissism is a disorder that is beyond simple self-regard, but refers to a destructive pattern of thought and behavior whose traits include an unrealistic sense of one’s importance and power, an excessive need for admiration and a lack of empathy for the feelings or needs of others.
Rice (2007) continues with calling Enron a classic example of narcissist leadership where the leaders begin to believe they are geniuses, and begin to believe they and their organizations are one-of-a-kind, that they’re changing the face of industry. They desire entitlements beyond any other C. E. O. ‘s. He continues that if problems arise, the debts mount, the revenues fall short of grandiose forecasts, the narcissists want to restore the image, they may o things to protect the image and does the unethical things (Rice, 2007).
In conclusion, Behr and Hildebrand (2002) conclude that Enron Corp.. Collapsed last fall because of massive failures by its management, board and outside advisers as well as self-enrichment by some employees in a culture that appears to have encouraged pushing the limits. That impulse to avoid public exposure, coupled with the significance of the transactions for Enron’s income statements and balance sheets, should have raised red flags for senior management, as well as for Enron’s outside auditors and lawyers but unfortunately it did not.
Behr and Hildebrand (2002) listed the result of failures of many; the tragic consequences of mishandling the partnerships were at many levels and by many people: a flawed idea, self-enrichment by employees, inadequately designed controls, poor implementation, inattentive oversight, simple accounting mistakes, and overreaching in a culture that appears to have encouraged pushing the limits. Behr and Hildebrand (2002) assessed the blame on many; Enron founder and longtime chief executive Lay was a leader but he did not ensure that those who reported to him were performing their oversight duties properly.
Jeffrey Shilling ears substantial responsibility for the failure to monitor dealings between Enron and the partnerships. The board of directors, which waived Enron’s conflict-of- interest rules to allow Fast to run the partnerships. Enron’s outside auditor, Arthur Andersen ALP, did not fulfill its professional responsibilities in its auditing work. The company’s outside law firm, Vinson & Alkies, should have brought a stronger, more objective and more critical voice to its review of Enron’s required disclosures to investors about the convoluted partnership transactions. References Behr, P. And Hildebrand, D. (2002).