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The Collapse of Enron Corporation Essay


What lead to the eventual collapse of Enron under Lay and Skilling?

The collapse of Enron can largely be explained by the complete disregard of ethical principles that companies should follow. In particular, Kenneth Lay and Jeffrey Skilling neglected their responsibilities to the main stakeholders of Enron, especially, stockholders, employees, and the community, in general. This lack of accountability and integrity resulted in the recklessness of the senior executives and their failure to address the inefficiencies of the organization (Gibney. 2005).

This is the main factor that should be considered. Furthermore, the management completely disregarded such issues as organizational performance, productivity, or competiveness. Instead, they chose to focus only on short-term gains. So, this corporation did not have a well-developed strategy. This issue is also important for explaining the downfall of this corporation.

How did the top leadership at Enron undermine the foundational values of the Enron Code of Ethics?

The leaders of Enron undermined the organizational code of ethics in several ways. First of all, they presented false information to the investors in order to increase their personal income (Gore & Guruprased, 2011, p. 6). Moreover, the company created artificial power cuts in order to increase the price of electricity (Gibney, 2005). In this way, they endangered the wellbeing of many people living in California (Gibney, 2005). Moreover, one should note that they did not warn other stakeholders about potential risks. Therefore, the management completely undermined the rules that are required by law and ethics. These actions completely contradicted their public rhetoric according to which the welfare of stockholders was the top priority for the management. So, one can say that their allegations about ethics were unfounded.

Respect: given Kenneth Lay’s and jeff skilling’s operating beliefs and the Enron Code of Ethics, what expectations regarding ethical decisions and actions should Enron’s employees reasonably have?

The behaviour of senior managers should have alerted employees. In particular, they should have seen that the senior executives are not interested in the welfare of various stakeholders. This argument is particularly relevant to people who had some knowledge about the internal operations of this corporation. Additionally, the official code of ethics adopted in this company was not compatible with corporate fraud. Thus, employees should have expected more transparent policies from the company. This is one of the main aspects that can be identified.

How did Enron’s corporate culture promote unethical decisions and actions?

It should be noted that the corporate culture of Enron was characterized by extreme competitiveness. The employees of this company had to demonstrate absolute commitment to the goals set by the management. One can mention the work of the Performance Review Committee that focused on the ability of workers to meet the requirements of managers (Gibney, 2005). The employees could justify their unethical conduct by arguing that it is accepted by organizational leaders.

The movie The Smartest Guys in the Room illustrated numerous situations when employees violated the rules of ethics only because they had to follow the directions of the manager. Special attention should be paid to the activities of such people as Andrew Fastow, who did not even think about the consequences of the accounting fraud (Gibney, 2005). Many of Enron managers relied on the authority of senior executives and accepted the unscrupulous methods.

How did the investment banking community contribute to the ethical collapse of Enron?

To some extent, investment bankers also contributed to the ethical collapse of Enron. First of all, many financial analysts believed that Enron’s performance was flawless, and they convinced the Enron executives of their infallibility. Moreover, according to the movie The Smartest Guys in The Room, some of the financial institutions helped Enron cover up their losses (Gibney, 2005). So, the investment banking community also played a critical role in this scandal.

Reference List

Gibney, A. (Executive Producer). (2005). Enron: The Smartest Guys in the Room. New York: Magnolia Pictures.

Gore, A., & Guruprased, M. (2011). . Web.

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IvyPanda. 2021. "The Collapse of Enron Corporation." January 12, 2021. https://ivypanda.com/essays/the-collapse-of-enron-corporation/.

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IvyPanda. (2021) 'The Collapse of Enron Corporation'. 12 January.

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