B Ethics Case Assignment 2
Week 2 Case Study
Case 9: Enron: Questionable Accounting Leads to Collapse
1. How did the corporate culture of Enron contribute to its bankruptcy?
Effective leaders are good at attaining common goals and objectives in effective and efficient ways; unfortunately for Enron, this was not the case. In the beginnings of the company, Chairman Ken Lay and CEO Jeffrey Skilling were efficient in growing their company from a small oil and gas pipeline firm into one of the largest entities in its industry. As the company began to grow and prosper, the demands of upper management became more aggressive and adversarial. Mr. Ken Lay was never satisfied and in his efforts to achieve more and more monetary gains, he implemented coercive power to shape his corporate culture. This power was most prevalently seen in the company’s employee review process; wittingly nicknamed “rank and yank” if employees of Enron ranked in the bottom 20% in regards to performance they would be conveniently railroaded out of the company (Ferrell, 2013, pp. 395-405). Mr. Lay wanted the best executives working for him, with a goal to motivate individuals to be the best they could be, but in my opinion, he created conflicts of interest that drove the company into bankruptcy.
2. Did Enron’s bankers, auditors, and attorneys contribute to Enron’s demise? If so how?
None of the scandals that took place at Enron would have been possible without the support of their attorneys, bankers, and auditors. Enron’s lawyers, Vinson & Elkins’, wrote opinion letters supporting the legality of many of their dealings. Without these letters, Enron would not have been able to follow through with many of their transactions. Enron’s leading bank affiliate, Merrill Lynch made internal hiring and firing decisions based on the recommendations and pressuring threats of Enron executives (Ferrell, 2013, pp. 395-405). The party with the highest level of contribution to the demise of Enron would have to be their external and
Case 9: Enron: Questionable Accounting Leads to Collapse
1. How did the corporate culture of Enron contribute to its bankruptcy?
Effective leaders are good at attaining common goals and objectives in effective and efficient ways; unfortunately for Enron, this was not the case. In the beginnings of the company, Chairman Ken Lay and CEO Jeffrey Skilling were efficient in growing their company from a small oil and gas pipeline firm into one of the largest entities in its industry. As the company began to grow and prosper, the demands of upper management became more aggressive and adversarial. Mr. Ken Lay was never satisfied and in his efforts to achieve more and more monetary gains, he implemented coercive power to shape his corporate culture. This power was most prevalently seen in the company’s employee review process; wittingly nicknamed “rank and yank” if employees of Enron ranked in the bottom 20% in regards to performance they would be conveniently railroaded out of the company (Ferrell, 2013, pp. 395-405). Mr. Lay wanted the best executives working for him, with a goal to motivate individuals to be the best they could be, but in my opinion, he created conflicts of interest that drove the company into bankruptcy.
2. Did Enron’s bankers, auditors, and attorneys contribute to Enron’s demise? If so how?
None of the scandals that took place at Enron would have been possible without the support of their attorneys, bankers, and auditors. Enron’s lawyers, Vinson & Elkins’, wrote opinion letters supporting the legality of many of their dealings. Without these letters, Enron would not have been able to follow through with many of their transactions. Enron’s leading bank affiliate, Merrill Lynch made internal hiring and firing decisions based on the recommendations and pressuring threats of Enron executives (Ferrell, 2013, pp. 395-405). The party with the highest level of contribution to the demise of Enron would have to be their external and
References: Ferrell, O., & Fraedrich, J. (2013). Business Ethics: Ethical Decision Making and Cases (9th ed., pp. 395-405). Mason, OH: South-Western/Cengage Learning. Ferrell, O., & Fraedrich, J. (2015). Business Ethics: Ethical Decision Making and Cases (10th ed., p. 492). Stamford, CT: Cengage Learning. Bottom of Form