The Rise and Fall of Enron
Regarded as one the bankruptcy reports to ever be reported in the history of the United States, the rise and downfall of Enron is still fresh in the minds of some individuals majorly due to its effect on the society where more than 21000 employees lost their jobs without a notice. As if that was not enough, the employees further lost any other finances that invested in the company in form of shares meant to serve as pensions after their retirement (Moesel, 2003). In what can be seen as a calculated move to take the hard earned monies from the employees, the company management urged the employees to increase their contributions as investments.
While the company in its initial practices upheld four fundamental codes of ethics that formed the basis for its success which included, integrity, respect, communication and excellence, explaining how an organization built on these basis would meet its demise becomes difficult going by the sudden growth the company had realized within a very short period of time (Thomas, 2002. It’s however believed that among the major causes of the downfall of Enron is a combination of some unethical behavior that included bad leadership and apprehension of poor corporate cultures. Due to the nature of the company where top officials were being ejected after differing with the Lay, while Skilling who was a compatriot to Lay took issues with rivals in the corporate arena and put in efforts to eliminate them as well as harassed the subordinates making them submissive.
Among acts that they put included manipulation of critical information in the course if handling both internal and external company engagements while placing their own personal interests ahead of those of the company making the exercise generally crooked (Moesel, 2003). They manipulated information while engaging in inconsistent treatment of internal and external constituencies. These leaders put their own interests above those of their peers only mattered about what they would gain at the end of their engagements and not possibly how the company or the rest of the employees would benefit (Thomas, 2002. This failure to exercise a proper oversight and act as leaders proves that they did not adhere to the business ethics set by the company that would enable its success thus the failure.
A number of businesses in the society today have great lessons to learn form the story of Enron as it highlights the implications of the failure to adhere to leadership proving the importance of integrating ethics into the contextual variables of trust and credibility in the leader-follower relationship. Among the unethical activities that the officials engaged in included putting so much loyalty in themselves rather than in the rest of the employees so as to enable the company to succeed while betraying those they that worked under them who apparently believed in the company’s optimistic pronouncements (Moesel, 2003). The exhortation came in form of a betrayal experienced by Enron employees adding to the pain of losing their jobs and retirement savings.
The kind of relations experienced among the company employees and the rest of the Enron’s relationships with both employees and the customers were coupled with inconsistencies as workers were forced to vest their retirement plans in Enron stock and then blocked from selling their shares (Thomas, 2002). Top executives were able to unload their shares as they received “retention bonuses” and laid off workers received only a fraction of the severance pay they had been promised.
The company maximized on donations from politicians to gather the preferential treatment from government agencies for instance Bush’s campaign received significant contribution from Kenneth Lay who was regarded as one of the top contributor while the other officials making major donations to both Democratic and Republican members of the House and Senate, a move that enabled the company to nominate friendly candidates that intervened with foreign governments to promote Enron projects as well as influencing the setting federal energy policy that favored deregulation of additional energy markets.
The collapse of the company was uncontrollable as it was not possible for those who regarded themselves as geniuses to control the downfall that had sparked leading to its sudden downfall for instance the then treasurer Clifford Baxter had expressed concerns about the financial wheeling and dealing by Fastow even though his complaint did not get anywhere as he retired before he would share his utmost concern with the company’s stakeholders (Moesel, 2003). The aspect of misuse of funds by the firm was also highlighted by the corporate development Vice-president Sherry Watkins who raised several eye brows with the regard to the financial practices recommending a cleanup of the problems rather than public disclosure.
The downfall of Enron is greatly associated with individualistic greed and pride coupled with creativity and risk taking as the employees put in more effort inventing a host of new commodity products earning Enron a top rank among most innovative companies. Ken Lay greatly prided as per the successes of the employees for instance in London where they started its on-line trading business but were later faulted for not receiving the blessing or knowledge of corporate headquarters in Houston.
References
Moesel, A. (2003). Here’s an Enron story nearly as intriguing as the saga of the company itself. Fast Company, (74), 38.
Thomas, C. W. (2002). The Rise and Fall of Enron. Journal Of Accountancy, 193(4), 41-48.