Enron s Leadership and Corporate Culture Term Paper

Pages: 13 (4221 words)  ·  Bibliography Sources: 10  ·  File: .docx  ·  Level: Master's  ·  Topic: Leadership  ·  Written: April 3, 2017


Lay was not interested in creating a culture founded on responsibility and transparency. He had already led a company with such a culture and success had been middling at best. He had his eyes now set on a bigger prize: when he brought Skilling aboard to help identify how the company could grow and increase its profits, Skilling looked not at the company's fundamentals, values and mission but rather at new accounting practices and easing regulations on Wall Street that could be used to transform the company from an energy organization into essentially a hedge fund. Lay did not question Skilling's ideas because the dollar signs they produced in his mind and Skilling's own ability to "sell" the idea displaced any qualms he should have had about this ingenious new approach to business. Even when Lay's top traders were found guilty of fraud and given jail sentences, the CEO refused to question the culture he had helped to create. Instead, he continued on the path of pride, arrogance and greed, refusing to tolerate any misgivings that might change the company's trajectory.Download full Download Microsoft Word File
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TOPIC: Term Paper on Enron s Leadership and Corporate Culture Assignment

One woman who sought to bring attention to the corrupt culture that Fastow in particular was helping to cultivate was Sherron Watkins, an Enron whistleblower who penned a scathing letter to Lay about the corrupt practices that Fastow was using to create his Ponzi-scheme with the company's debts and "assets". Instead of investigating Watkins' claims, Lay set the letter aside and encouraged her to take a vacation (Eichenwald, 2005). Watkins went along with Lay's recommendation because ultimately she had, like many of the other employees, a natural inclination and need for feeling a sense of "belonging" among Enron's leaders (Swartz, Watkins, 2003, p. 2). Watkins herself pointed out that her main goal at the company in 2000 was to not "be taken for a loser" by her managers: she saw the corruption -- which is why she warned Lay -- but she also wanted to fit in and be seen as a good team player (Swartz, Watkins, 2003, p. 2). This desire to fit in, moreover, is one that is consistent with research on the way that corporate cultures are created: the tone that is set at the top is the tone that is followed by workers at the bottom (Schyns, Shillling, 2013). The workplace is like a family and belonging to a family is a natural compulsion -- which is why creating a family based on solid values and virtues is so important: the culture is what leads to how an organization will succeed. Lay and Skilling tried to keep a positive face on their endeavors and to get everyone to go along with them: to appear openly deceptive and without scruples would have been to risk losing team players like Watkins completely (Schyns, Schilling, 2013). Thus, they rationalized their new approach to business in the manner described by Anand et al. (2005). Over the years, however, the deceptions accumulated regardless and prompted Watkins to take action -- to an extent. In her letter to Lay, Watkins pleaded for the company's leadership to take responsibility and right the ship before it injured all employees: "My eight years of Enron work history will be worth nothing on my resume, the business world will consider the past successes as nothing but an elaborate accounting hoax" (Swartz, Watkins, 2003, p. 2). Clearly she was concerned that the practices of the company were going to bring nothing but harm for those the company employed. She implored Lay to correct the culture that was fostering these bad accounting practices -- but she did not go so far as to remove herself from the company: she still believed in the vision and in the success -- even as both were unraveling under investigators' analysis of the company's accounting.

Afterwards, Watkins would admit that the "spirit" at Enron had been completely divorced from sound economic policy. She would go on to "find God" after the fall of Enron, an expression that coincides with her reflection that an organization ought to embrace a system of workplace ethics in order to be successful (Watkins, 2008). This correlation supports the view of Barnett, Bass, and Brown (1996), that religiosity can affect a whistleblower's decision to report. Considering this view and the perspective of Tsahuridu (2011), it may be argued that a sense of 'God' and/or 'virtue ethics' can have a positive impact in risk management strategy. For Watkins, the importance of a genuine, right 'spirit of mission' was not realized until her organization collapsed.

Enron's corporate culture was developed by Lay and Skilling primarily. Fastow was the individual who, inspired by what they were promoting, developed the technique to make it happen. Lay viewed himself as a visionary and thought of Skilling in the same manner. Likewise, employees at Enron were encouraged to view Skilling and lay in the manner that they viewed themselves: Skilling was seen as a kind of "prophet" who showed the company "the way" -- the way to make money through dubious and eventually unlawful means, that is (Gibney, 2005). Rather than adhering to the model of providing natural gas to buyers through pipelines, Enron became a buyer of natural gas and began trading derivatives based on its own acquisitions.

The attitudes and perspectives of its top leaders shaped the organization and the "trader" culture that grew out of its new focus. Indeed, one of Skilling's favorite books was entitled The Selfish Gene, which described human beings and human nature as being guided inherently by the forces of "competition and greed" (Gibney, 2005). By simply accepting these as principles of right human behavior, Skilling was responsible for creating a corporate culture that was antithetical to universal ethics. Competition and greed acted as an unofficial corporate culture imperative at Enron. This imperative was, moreover, guided by pride -- the pride of its leaders. Skilling was particularly susceptible to this pride, which he demonstrated even before becoming COO at Enron. In Harvard Business School he had been asked by a professor whether he was smart; Skilling had said in response, "I'm fucking smart" (Eichenwald, 2005). Skilling's "smarts," as he called them, would not be enough to keep Enron afloat, unfortunately. Had Skilling also developed a better sense of ethics to guide his obvious leadership abilities, Enron may have had a much brighter future. Instead, he and Lay imagined that "smarts" was all that was needed.

Enron finally lost all credibility when it became public knowledge that its mission had failed and that it was far too over-leveraged to ever possibly repay all its debts, with creditors calling. Although Skilling denied any wrongdoing, several persons pointed out that the wrongdoing occurred on his watch and that he, in fact, promoted a culture that fostered the sort of duplicity exercised by Fastow in the role of CFO. Lay, too, had to take responsibility for the way in which the company ultimately failed. However, neither Skilling nor Lay were willing to admit guilt. Only Fastow pled guilty when brought before the law.

One of the few people who tried to help Enron by bringing its unethical accounting practices to the attention of Lay, Sherron Watkins, went on to enjoy a career as a public speaker, warning her audiences about the dangers of corporate cultures that failed to be based on virtue ethics. As a whistleblower at Enron, she demonstrated the problem of how employees who see corruption within their workplace are supposed to report on the matter. She herself went straight to Lay and then later began speaking to the media about the issues that Enron had under Fastow in the accounting department. If Enron had had a culture that was open to reporting on corruption and practices that went against its core values, it might have been more willing to address the issues. Enron's leaders were not open to such a culture, however; they were eminently devoted to their own "smarts" and the idea that only they could really know in which direction the company should ultimately be directed. A whistleblower like Watkins was not someone whose input was valued. This detachment from actual values was the underlying reason Enron finally perished.


Organizations needs to be guided not by a system of modern ethics, which can easily be reduced to legalistic rationales for why "greed is good" (as Skilling, Lay and Fastow essentially showed), but by a moral initiative -- a traditional, universal sense of ethical practices. In modern terms, what is good is often debated and can open the door for leaders and cultures to be develop that are inherently selfish. Skilling's favorite book showed that he was not oriented to the issues of corporate social responsibility in a way that stakeholders would prefer. Instead of focusing on virtue ethics, he focused on the "ethics of… [END OF PREVIEW] . . . READ MORE

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