Enron & Tyco Case Studies
Running head: CASE STUDIES: ENRON’S FALL AND TYCO INTERNATIONAL’S LEADERSHIP CRISIS
Case Studies: Enron’s Fall and Tyco International’s Leadership Crisis
Grand Canyon University
BUS 604
November 4, 2009
Case Study: Enron’s Fall and Tyco International’s Leadership Crisis The tight Federal regulations now governing businesses and their accounting practices came about because one corporation, Enron, took risks their company could not withstand without taking some rather extreme measures in its accounting to hide the risk. Tyco International went down a different path in that the CEO used corporate accounts as his personal bank account. He placed certain business associates on the Board of Directors to ensure his behavior would not be found out nor questioned. As corporate ethics goes, Enron and Tyco International are prime examples of bad business ethics run amok. The CEOs of both companies expected not to get caught doing what they were doing and both were taking large risks with the companies. The following will examine Enron’s Fall and Tyco International’s Leadership Crisis as portrayed in the case study in Ferrell, O. C., Fraedrich, J., & Ferrell’s book Business Ethics: Ethical Decision Making and Cases, by answering the questions at the end of the prospective studies.
Case Study: THE FALL OF ENRON: A STAKEHOLDER FAILURE
1. How did the corporate culture of Enron contribute to its bankruptcy? The company’s culture was very much part of its demise. With Skilling indicating to other energy corporations that he was going to “eat your lunch”, spells it out pretty convincingly that the top executives felt “overwhelming pride and deep-seated belief that they could handle increasing risk without danger”. In an article in Business Ethics Journal, the authors suggest the Enron debacle incurred widespread and inefficient unethical behavior resulted in the company’s collapse virtually from its own configuration. The firm’s appraisal system
Case Studies: Enron’s Fall and Tyco International’s Leadership Crisis
Grand Canyon University
BUS 604
November 4, 2009
Case Study: Enron’s Fall and Tyco International’s Leadership Crisis The tight Federal regulations now governing businesses and their accounting practices came about because one corporation, Enron, took risks their company could not withstand without taking some rather extreme measures in its accounting to hide the risk. Tyco International went down a different path in that the CEO used corporate accounts as his personal bank account. He placed certain business associates on the Board of Directors to ensure his behavior would not be found out nor questioned. As corporate ethics goes, Enron and Tyco International are prime examples of bad business ethics run amok. The CEOs of both companies expected not to get caught doing what they were doing and both were taking large risks with the companies. The following will examine Enron’s Fall and Tyco International’s Leadership Crisis as portrayed in the case study in Ferrell, O. C., Fraedrich, J., & Ferrell’s book Business Ethics: Ethical Decision Making and Cases, by answering the questions at the end of the prospective studies.
Case Study: THE FALL OF ENRON: A STAKEHOLDER FAILURE
1. How did the corporate culture of Enron contribute to its bankruptcy? The company’s culture was very much part of its demise. With Skilling indicating to other energy corporations that he was going to “eat your lunch”, spells it out pretty convincingly that the top executives felt “overwhelming pride and deep-seated belief that they could handle increasing risk without danger”. In an article in Business Ethics Journal, the authors suggest the Enron debacle incurred widespread and inefficient unethical behavior resulted in the company’s collapse virtually from its own configuration. The firm’s appraisal system
References: Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2009) Business ethics: ethical decision making and cases 2009 update. (7th ed.) Ohio: Cengage Learning Kolek, J. (2009). Managing a Crisis -- and Becoming a Stronger Organization. Public Relations Strategist, 15(3), 36-37. http://search.ebscohost.com Kulik, B., O’Fallon, M., & Salimath, M. (2008). Do Competitive Environments Lead to the Rise and Spread of Unethical Behavior? Parallels from Enron. Journal of Business Ethics, 83(4), 703-723. http://search.ebscohost.com, doi:10.1007/s10551-007-9659-y