Enron Scandal

The Enron Scandal: The role of ethics in competitive environments.

Abstract

Enron Corporation was once one of the largest energy, commodities, and services company in the world. The company reportedly won awards for being America’s most innovative company and best place to work. Unfortunately, the company ran a systematic accounting fraud, better known as the Enron Scandal. Unethical behavior from the top executives trickled down to the bottom. This case study aims to detail the role leadership, power, group-think, and organizational culture in promoting unethical behavior that led to the downfall of Enron.

Key words: Enron, unethical behavior, organizational culture, leadership, power

The Enron Scandal

Defining the central issue

Enron Corporation was one of the largest energy, commodities, and services companies in the world. The company was based in Houston. Enron reportedly won awards for being America’s most innovative company, most admired and best place to work (Healy, & Palepu, 2003; Kulik, 2005; Kulik, O’Fallon, & Salimath, 2008). Yet within a year, the company’s image dropped from being the best to the west. Enron’s stock price plummeted to less than $1 per share, almost worthless overnight (Healy, & Palepu, 2003) . Enron’s failure was due to a systematic accounting fraud, better known as the Enron Scandal. Unethical behavior from the top executives trickled down to the bottom (Kulik, O’Fallon, & Salimath, 2008). Ultimately, this led to the collapse of the company which affected employees, pension funds, and investors.

Enron was founded by Kenneth Lay founded in 1985 through the merger of two natural gas pipeline companies, Houston Natural Gas and Internorth. Enron owned more than 36,000 miles of interstate pipelines for transporting natural gas between producers and utilities. Although transporting gas was lucrative, Enron pursued several diversification strategies in order to...