Enron Corporation - How Executives Develop a Reputation for Ethical Leadership - Case Study Example

LЕАDЕRSHIР САSЕ STUDY-THE ENRON Name: Institution: Professor: Course: Date: Executive Summary Leadership is defined as the ability of the superiors in an organization or society to control the subordinates. Leaders are people who have influence and control on the behavior of their subordinates in the organization. Leaders, therefore, can control their subordinates to a course of action the want them to follow. The purpose of this report is to explore and clearly explain what happened in the Enron and related it to leadership theories and concepts learned in class. The report therefore critically analyzes all the occurrences that took place at the Enron. This case study aims at relating the leadership theories and concepts to the happenings at Enron. Findings will be explained and used to make conclusions. Necessary recommendations will also be indicated at the end of the case study (Sarros and Santora, 2001 p.245). The field of research here is Enron. Enron Corporation was an American commodities, energy, and services company. The company was based in Houston, Texas. Enron Corporation was among one of the most notable companies in the world. It was popular in its production of natural gas, electricity, and other services. The commodities, energy and services that the company offered created an enormous number of job opportunities. Statistics and records reveal that the company employed around 20,000 staff in the business. However, the company due to various reasons that this case study will highlight ceased operation on the 2nd of December 2001 (Sinha, 2008 p.15). There are several issues and findings that the case study has analyzed in detail. Major questions that affected Enron Corporation include poor leadership, bankruptcy, and discrimination of employees, corruption and lack of integrity. Most of the transactions that were conducted were unfair and dubious. The theory that will be used is participative leadership. Participative leadership theory is based on the following assumptions: a. Involvement in decision‐making improves the understanding of the issues involved by those who must carry out the decisions. b.There is more commitment to decisions c. Joint goals and objectives attract more collaboration d. When people make decisions together, the social commitment to one another is greater and thus increases their commitment to the decision. e. Better decisions are made by many people Findings Numerous problems have been found in the case study. These problems are all that contributed to the fall of Enron Corporation. One of the major issues in the Enron Corporation is the lack of proper rules, regulations, and laws. The company had no standards and regulations governing duties and responsibilities all the staff in the organization. Part of the Enron story reveals the following information: “The rules in California are terrible'', but then once you see what the rules are, you guys push those rules to the edge in an effort to make a buck”. From the above information, it is clear that not set rules, and policies were established to govern the employees. Even leaders should be governed by rules and regulations of the company. The second problem in the case study is corruption. The Enron story reveals a lot of information that gives clear indication that the company had a lot of instances of fraud. A superb evidence of corruption from the Enron story is indicated below. It is stated that: “One example of unethical practices was the transfer of energy out of California to create blackouts thus raising the price of electricity." The transfer of power to California to create blackouts was a very unethical practice. Such practices amount to the corruption that lead to the bankruptcy and hence fall of the company (Brown and Trevino, 2006 p.598). Bankruptcy is another problem that was crucial to the company. The report reveals that: “It was the biggest and most complex bankruptcy case in US history and had a devastating effect on thousands of employees and investors." It is a clear indication that the company ended up with bankruptcy for various reasons. The major problems that led to the bankruptcy are weak leadership, unethical practices, mismanagement of funds and lack of proper rules and regulations governing the company. The story also reveals that there existed a weak organizational culture in the organization. The culture that was in place was not up to the standards. The report shows that one Jeff Skilling, Enron’s Chief Executive at one time decided to resign for personal reasons. The company allowed him to sell his stock at a premium price. It is a clear indication that the culture of the organization is not well developed (Baumgartner, 2009 p.104). Discussion The first major problem was the lack of rules, regulations, and laws governing the company operations. The company should have put in place proper laws, standards and regulations governing the transactions of the company. Such rules stipulate what an office bearer is expected to do, procedures of doing it and the consequences of breaking such rules. Policies, rules and regulations could have prevented or reduced such incidences of corruptions. The advantage of such rules and policies is that it forces the staff or leader to work under only stipulated laws. Working against them attracts legal action from the company. However, one disadvantage of such is that the workers or leadership may not like the laws hence leave the company. Corruption is another problem that the company faced. Corruption occurs when the leadership is weak in an organization. Employees should work with integrity and value to achieve the best in the organization. Leaders of the organization should not put their interest first. They should put the interest of the organization at the frontline of their duties and responsibilities. One main advantage of this alternative solution is that majority of leaders work professionally. Fighting corruption is part of the professional code of ethics (Baumgartner, 2009 p.105). The Enron Corporation is depicted to have had poor organizational culture. Organizational culture is basically how things are done and how people behave in a given organization. Different organizations have different organizational cultures. It is, therefore, the role of the leaders to develop a superb organizational culture. Organizational culture in which integrity, respect, transparency and punctuality in an organization is highly encouraged. Leaders should have worked to act as role models to their subordinates. An advantage of developing an organizational culture is that anybody who joins the company either as a new staff or employee will have to fit into the system or simply leave (Trevino at el, 2000 p. 131). One way to deal with bankruptcy, a lot should have been done. The leadership of the company should have been vetted. Leaders found to be corrupt should have faced the law. Such leaders are subjected to interrogation and investigation, and if found guilty they pay. Enron ended up filing bankruptcy that led to the collapse of the company in December 2001. However, one disadvantage of such methods as vetting might be expensive for the company especially when external audit in involved. Conclusion The findings and the discussion of the alternative solutions are clear. There is great need to ensure that every company has rules, regulations and policies governing operations of the company. Whenever we have laws, violators of the same will face legal actions. It, therefore, contributes to the success of the company. Corruption and other unethical vices should be discouraged at all cost. Enron Corporation must ensure that they lay down an organizational culture that is imperative. It will serve to ensure the best performance of the organization. Recommendations I recommend developing a healthy organizational culture as a priority alternative. It will serve to solve various problems ranging from leadership issues to subordinate issues. When the culture of the organization is stable, issues such as poor leadership and corruption cannot be witnessed in the organization. Organizational culture will ensure that when leadership changes, there will be minimal or no change in the way organization functions. The theory of participative leadership will apply here. Leaders will be expected to involve the other employee in decision making. Such leadership will ensure that the staff feels part of the decisions made hence making right decisions. The participative theory of leadership is currently exercised in many organizations. Such organizations have been ranked high in performance and productivity (Brown and Trevino, 2006 p.598). Implementation The leadership or the top management should develop a plan to incorporate and adopt the necessary recommendations. Leaders should be trained on various work-related issues in the organization. A sample of the employees should also be trained on the main matters that are significant to the organization. The leadership can also plan on benchmarking organizations that are in the same sector as Enron Corporation. Such training and the benchmarking program can be organized for six months. A rough estimate of $50,000 will be able to gather for the budget. Unnecessary costs can be ignored for this case (Brown and Trevino, 2006 p.599). References Sarros, J.C. and Santora, J.C. (2001). Leaders and values: a cross-cultural study. Leadership and Organization Development Journal, 22(5), 243-248. Trevino, L.K., Hartman, L.P. and Brown, M. (2000). Moral person and moral manager: how executives develop a reputation for ethical leadership. California Management Review, 42(4), 128-142. Sinha, J. (2008).Culture and organizational behavior (4th ed., Vol. III, pp. 11-34). New Delhi: SAGE. Baumgartner, R.J. (2009) Organizational culture and leadership: Preconditions for the development of a sustainable corporation. Sustainable Development. 17:2, 102-113. Brown, M.E. and Trevino, L.K. (2006) Ethical leadership: A review and future directions. Leadership Quarterly, 17: 596-616. Participatory Leadership and Women - Daina Middleton. (n.d.). Retrieved from http://www.dainamiddleton.com/participatory-leadership/ Interviews - Jeff Skilling | Blackout | FRONTLINE | PBS. (n.d.). Retrieved from http://www.pbs.org/wgbh/pages/frontline/shows/blackout/interviews/skilling.html Read More