Organizational Behavior and Enron

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Date Submitted: 02/15/2011 11:23 AM

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Who is Involved

In an organization, there are senior leadership, internal and external auditors, and a board of directors. When you have an organization, the CEO is not the main decision maker, everyone in the organization makes up what is otherwise known as organizational behavior. Basically organizational behavior studies what people do in an organization and how their behavior affects the organization. In our example company Enron, the behavior of the members listed above deteriorated the company. For an organization to be successful, one of the key elements lies on the collective efforts and wise decisions of the directors, auditors, and senior leadership.

Enron’s Failure

What are the reasons we think Enron failed? A sloppy broad oversight, imaginative accounting off balance sheet financing, and maybe also a criminal CFO. Actually Enron collapsed chiefly because its managers were paid to aim at the wrong financial measures (Stewart 2006). “Fiduciary Failure. The Enron Board of Directors failed to safeguard Enron shareholders and contributed to the collapse of the seventh largest public company in the United States, by allowing Enron to engage in high risk accounting, inappropriate conflict of interest transactions, extensive undisclosed off-the-books activities, and excessive executive compensation. The Board witnessed numerous indications of questionable practices by Enron management over several years, but chose to ignore them to the detriment of Enron shareholders, employees and business associates.” Even the employees at Enron were to be blamed (Gudinkunst, 2002). “Enron employees also facilitated the failure of their own company, and have suffered accordingly. Enron had an inside legal staff of over 100 lawyers and an accounting staff of several hundred trained accountants. All seemed to be operating in a way that supported the executive management team. There seemed to be little incentive or willingness to question the methods being employed to...

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