Approximately 10 years ago, the truth emerged about Enron, one of the largest and seemingly most successful energy companies in the world until it collapsed and declared bankruptcy. What happened at Enron was due primarily to the ethical climate in business at the time; however, accounting frauds such as Enron are not new.
This paper will examine the charismatic leadership from a well-educated man who received both his bachelor and master degree in economic from the University of Missouri and earned a Ph.D. in economics at the University of Houston. Who would have thought someone so educated would have needed help making smart decisions.
Mr. Kenneth Lay, Founder and Jeffrey Skilling, CEO of Enron and a few of their other colleagues allowed greed to cloud their judgment that later ended with charges against them of conspiracy and fraud. In this research we will prove how bad decision making, greed, and lack of self-control eventually lead to the destruction of an empire. This paper will show leaders that lack ethics and integrity will not be able to endure the test of times. Regardless of their intelligence and savvy personality if a leader is prone to unethical behavior they will eventually give in to their own destruction. Unethical behavior verses doing the right thing will never equal success.
Corrupt leadership created by senior management creates an immoral organizational culture and it promotes unethical behavior by the subordinates. These types of behaviors eventually lead to over 20,000 employees losing their jobs, health care and savings.
Greed, arrogance, and accounting fraud were a matter of inadequate or misleading stockholder information by the organization prominent business executives. Also, when Enron had a high concentration of their stock in their 401(k) but employees are forced to hang onto their shares for years this lead to destruction. Once Enron’s finances collapsed they replaced their operations with the illusion of success.
In 2005, a documentary film was released called The Smartest Guys in the Room. This documentary film examined the collapse of the Enron Corporation, the criminal trials for several of the senior executives from the company and convictions. Enron ultimately failed for the same general reasons that lead to all bankruptcies: investments that proved too risky to service the debt obligations of the firm. Enron was to make only limited investment in some commodity supply chain and to use the information from the operation of these physical assets to create a wholesale market and risky-spreading instruments for the commodity, a model that required Enron to maintain sufficient equity capital and the ability to borrow to absorb the occasional loss of cash flow from its trading activities.
Enron was founded by Kenneth Lay a preacher’s son in 1985. The company was only two years old when the scandals began due to a couple of bad decision being made by...