Enron and Ethics
Enron and Ethics
Failure is the best teacher not only for those who fail, but also for those who observe the failure. Thus, for many businesses the Enron scandal proved to be the greatest teacher. Since the fall of Enron, there have been several theories and examinations about why it failed as it was a corporation that no one imagined would ever crash. Based on research to date there are multiple reasons for Enron’s failure; however, one that stands out immensely is corporate disregard for ethics.
To understand why Enron’s scandal was such a shock, it is first important to note its background. Prior to its collapse, Enron was one of the biggest global energy and services company. It sold natural gas and electricity. Once deregulation of electricity took place, Enron became more innovative and instead just selling energy, it became an “energy matchmaker” bringing buyers and sellers together and profiting from their exchanges (Borden, 2003). It was named the greatest company to work for by Fortune Magazine several years in a row and at one time was the seventh largest company in the United States (Borden, 2003). Unfortunately, Enron’s unethical behavior led Enron to set yet another record—the highest corporate bankruptcy ever at that time (Borden, 2003).
Enron’s unethical behavior rooted from the lack of a strong organizational culture. It is important to have a strong organizational culture as it helps tie ethics, attitudes, and organizational philosophy together. Enron’s culture lacked emphasis on business ethics. Though it had a code of ethics in place for employees and executives alike, which outlined how business should be conducted, it was put on the back burner and was obviously overlooked by executive leaders, managers, and employees (Bartlett, 2002). Enron did not seem to value honesty, steady growth, and hard work. Rather, the corporation valued aggressiveness, risk-taking and creativity, all qualities that are respectable when balanced with social
Failure is the best teacher not only for those who fail, but also for those who observe the failure. Thus, for many businesses the Enron scandal proved to be the greatest teacher. Since the fall of Enron, there have been several theories and examinations about why it failed as it was a corporation that no one imagined would ever crash. Based on research to date there are multiple reasons for Enron’s failure; however, one that stands out immensely is corporate disregard for ethics.
To understand why Enron’s scandal was such a shock, it is first important to note its background. Prior to its collapse, Enron was one of the biggest global energy and services company. It sold natural gas and electricity. Once deregulation of electricity took place, Enron became more innovative and instead just selling energy, it became an “energy matchmaker” bringing buyers and sellers together and profiting from their exchanges (Borden, 2003). It was named the greatest company to work for by Fortune Magazine several years in a row and at one time was the seventh largest company in the United States (Borden, 2003). Unfortunately, Enron’s unethical behavior led Enron to set yet another record—the highest corporate bankruptcy ever at that time (Borden, 2003).
Enron’s unethical behavior rooted from the lack of a strong organizational culture. It is important to have a strong organizational culture as it helps tie ethics, attitudes, and organizational philosophy together. Enron’s culture lacked emphasis on business ethics. Though it had a code of ethics in place for employees and executives alike, which outlined how business should be conducted, it was put on the back burner and was obviously overlooked by executive leaders, managers, and employees (Bartlett, 2002). Enron did not seem to value honesty, steady growth, and hard work. Rather, the corporation valued aggressiveness, risk-taking and creativity, all qualities that are respectable when balanced with social
References: Bartlett, C. (2002). Enron 101. BizEd, 40(7). Retrieved from http://search.ebscohost.com /login.aspx?direct=true&db=tfh&AN=8624332&site=ehost-live Borden, T. (2003). Enron: How did this Happen. In S. G. Benson, N. Matuszak, & M. A. O 'Meara (Eds.)History Behind the Headlines: The Origins of Conflicts Worldwide, (Vol. 6). (pp. 98-111) Detroit: Gale Retrieved April 5, 2010, from Gale Virtual Reference Library via Gale: http://go.galegroup.com/ps/start.do?p=GVRL&u=apollo Stewart, B. (2006). The Real Reason Enron Failed . Journal of Applied Corporate Finance, 18(2), 116-119. doi:10.1111/j.1745-6622.2006.00092.x. Yukl, G. (2006). Leadership in organizations (6th ed.). Upper Saddle River, NJ: Pearson Education.