EXAMINING A BUSINESS FAILURE

EXAMINING A BUSINESS FAILURE

Raj Krishnan

LDR 531 - Organizational Leadership

University of Phoenix

Abstract

This paper will discuss how organizational behavior theories could have predicted or can explain the failure of a company. We will discuss the how one of the largest energy companies in the US failed. How this catastrophic failure could have been prevented. Enron fell from its glory days to bankruptcy due to bad organizational behavior. If only all the players (internal and external) of the organization had played their parts ethically and appropriately, the fall would have never happened.

The Players

The main players of any organization are senior leadership, board of directors, internal auditors and external auditors. The CEO alone does not run a company, but the senior leadership, board of directors are also part of all the decision making process. The auditors (internal and external) exist for making sure that there is monitoring of the system. In case of Enron, all the players failed to do their part. All these players play important part of any organization because it is impossible for one person run an organization. The success of organization lies in the collective efforts and smart decisions made by these important players. The downfall of the organization cannot be prevented even if one of the players is not executing their part ethically and sincerely.

The Failure of Key Players

The internal auditors failed to investigate any mal-practice because they did not deem it necessary because of the company’s rising stock prices and projected growth. Board of directors of Enron also failed to intervene into the wrong doing of the management. As per the senate subcommittee investigations (Levin, 2002)

“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...