Company Analysis Essay on Enron Bankruptcy

Published: 2021-06-30
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George Washington University
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Enron Corporation is a company in the US formed in 1985 after Houston Natural Gas Co. and InterNorth merged. The organization acquired a dramatic height only to undergo a sudden collapse. The story of the organization ended as one of the largest bankruptcy incidents in the US. Enron Corp. took advantage of the deregulation which allowed energy markets to set bets on their future prices. This era and the revolutionary internet allowed the organization to flourish since a significant number of investors accepted the spiking share prices ("Transcript," 2017). The corporation launched Enron Online (EOL) which focused on commodities and was the counterparty to almost all transactions on EOL. For this reason, the company was praised for the remarkable expansion and good projects and was named as the "America's Most Innovative Company." In the mid-2000, the project was near $350 billion in trades, and the organization decided to build a high-speed internet network which ended up realizing no return.

The recession further worsened the situation with many investors and creditors finding themselves on the losing side of the market cap. The collapse of the Enron had a significant ethical effect to the society. The incident affected many lives and also affected Wall Street significantly. During the peak, the Corporation shares were worth $90.75, but with the incident, they plummeted to $0.67. Many are still wondering why such a big organization would have collapsed overnight and who is to blame. The reason behind the downfall of the company was linked to the ethical issues among the leaders. There were improper trade activities, accounting frauds, and inappropriate ethical culture. An examination of the top leadership of the organization can help understand the unethical processes which eroded the culture of the organization and how they can be avoided in the contemporary organization to help achieve the success of various organizations.

Terminal values are the expected end-states of reality or the goals set that need to be achieved during within a period or in a given organization. The values often vary among different groups and in different cultures. Instrumental values are the expected modes of behavior or the means applied in the organization to achieve the terminal values. According to Rokeach, the leaders would have applied a sense of accomplishment which is a terminal value and honesty and plus some sense of sound mind which are part of the instrumental values. These values would have helped prevent the bankruptcy since it would have made the leaders truthful and sincere to the investors thereby making reasonable investment decisions.

Among the ethical theories and rationales for the ethical behavior in the gamble and gamble text, two are related to the context of Enron bankruptcy leadership. These are utilitarianism and ethical egoism. In relation to Utilitarianism, the leadership of Enron was more focused on the short-term success of the company which made it difficult to identify the benefits or the costs of the decision made hence the scandal. Ethical egoism, on the other hand, seeks to create the best for the largest population with little cost. According to the theory, the leadership at Enron did best then for personal gain rather than the long-term growth of the organization.

Entirely, the ethical behaviors of Kenneth Lay and Jeffrey Skilling established a culture of fraud and cheating at the corporation that later spread to the entire organization and motivated even the low-level employees to participate in unethical behaviors. The main reason of these two top level leaders was to make money for themselves hence the fraud and theft across the board. In any other culture, the behaviors cannot be considered ethical. This is because, in any culture, there is a need for accountability and clean business deals for the good of the locals and the overall growth of the organization. Many cultures aim at increasing the corporate social responsibility and establish organizations that are clean in the eyes of the employees, the investors and the consumers as well. An organization with a disoriented CSR will have a diverse effect on the customer's perception and the overall growth of the organization.

The use of Sissela Bok's model in decision making and the overall management of Enron would have changed the outcome. This is because the model focuses on two most important aspects which are social trust and empathy. According to the model, those who are affected by the decision made by the leaders would have been the most imperative aspect of decision making. That is the economic effect of the scandal on the local community and the employees who depended on the company (Jones, 2014). Furthermore, the model needs to consult the leader's consciousness in determining rightness, the concerned experts who would assess the ethical implications of different decisions made by the leaders and more importantly the model would have consulted those affected in the process of the decision making to see their perspective of the situation and avoid long-term adverse effect to the corporation.

As evident in the case, the leadership of Lay and Skilling was the main reason for the failure of the company which has achieved significant success. Their incompetency and their greed to make money for themselves were the subjects of the scandal at Enron. There are various strategies that organizations used in ensuring accountability for following ethical norms. First, the leadership attitude should be based on ethics and moral responsibility to prevent an organization from reaching the point of bankruptcy. A connection of the corporation ethical statements with its other operations can help channel the company towards the right path (Ciulla, 2014). Even though there was a code of conduct which was supposed to be strictly followed by the leadership at Enron, it later functioned as a mere document. Had the leadership acquired the spirit of the document and promoted the same spirit within the organization, it would have saved Enron. Secondly, there is need to ensure quality leadership to ensure there is a conducive corporate culture.

In a nutshell, Enron has been a good example of how unethical and corrupt leaders can bankrupt any corporation. There is a need for any leader to acknowledge the relationship between leadership and ethics to show effective leadership skills. At the same time, how leaders practice ethics is different from other leaders, and there is a need, therefore, to be more careful about the subordinate actions within the organization. The leadership of Kenneth Lay and Jeffery Skilling was the main reason for the failure of the corporation. They engaged in unethical practices to acquire money for personal benefit. Ideally, the business world has acquired significant knowledge from the episodes that emanated from Enron, and different alternatives are underway to ensure ethics and moral behavior in business are promoted. Trends are emerging in relation to the issue and practices are being set to guide leaders in the event of an ethical dilemma in an organization. Enron bankruptcy would have been evaded it not for the greed and bad ethical leadership.


Ciulla, J. B. (2014). Ethics, the heart of leadership. Westport, Conn: Praeger.

Jones, B. D. (2014). Political Bubbles: Financial Crises and the Failure of American Democracy. By McCarthy Nolan, Poole Keith T., and Rosenthal Howard. Princeton: Princeton University Press, 2013. 356p. $29.95. Perspectives on Politics, 12(02), 496-499.

Transcript. (2017). Retrieved 9 May 2017, from

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