Examining a Business Failure

Examining a Business Failure

John WIlliams

University of Phoenix

LDR 531

Tarik Iles

April 6, 2010

Workshop One

Individual

Corruption within an organization is commonplace. Therefore, it is essential to evaluate businesses that have folded because of corruption. This paper will provide a brief overview of Enron. The paper will consider organizational behaviors that contributed Enron’s corruption practices. The paper will compare and contrast Enron’s leadership, management, and organizational structures to the failure.

Examining a Business Failure

In 1985 Houston Natural Gas merges with InterNorth to form Enron, CEO Kenneth Lay becomes CEO of combined company the following year. A few years later, Enron starts trading natural gas commodities. Over time, CEO Kenneth Lay hires Jeffrey Skilling to lead the company to focus on commodities trading in the deregulated markets. Andrew Fastow is one of Skilling's first hires later that year. Later on in 1998, Fastow is named finance chief of Enron (USA Today, 2006). As a financial leader, Andrew Fastow seems to have used Enron's virtual strength to his advantage.

It appears the unethical behavior begins as a result of Mr. Fastow creating the first of two partnerships, LJM, purported to "buy" poorly performing Enron assets and hedge risky investments. It helps the company hide debt and inflate profits. Enron directors approve Fastow's plan that he run the partnerships that do deals with Enron while continuing as Enron's finance chief (USA Today, 2006).

Clearly one of the main issues is Enron’s officers lacked good ethical behavior. At the same time, (P and Judge, T, 2007, p. 26) agree that “what constitutes good ethical behavior has never been clearly defined, and, in recent years, the line differentiating right from wrong has become even more blurred.” Furthermore, (Robbins & Judge, 2007, p. 26) ,explains corporate executives inflate their company’s profits so they can cash in...