Ethics and Corporate Social Responsibility: Why Giants Fall

By Ronald R. Sims | Go to book overview

7

Enron: How a Failure of Leadership, Culture, and Unethical Behavior Brought a Giant to Its Knees

INTRODUCTION

When people hear the word “Enron, ” most think of corruption on a colossal scale—a company where a handful of highly paid executives were able to pocket millions of dollars while carelessly eroding the life savings of thousands of unwitting employees. But earlier, the same people would have heralded Enron as a paragon of corporate responsibility and ethics—successful, driven, focused, philanthropic and environmentally responsible. Enron appeared to represent the best a twenty-first-century organization had to offer. How did Enron transition from that golden status to being equated with questionable accounting techniques and off balance-sheet financing transactions, misleading statements, unscrupulous executives, dishonest partnerships, and ill-gotten personal gain?

The roots of Enron's fall can be found in its failed leadership and culture. This chapter describes how executives at Enron created an organizational culture that put the bottom line ahead of ethical behavior. After a brief background on Enron and its rise and fall, like our analysis of the Salomon Brothers fall, the five primary mechanisms available to leaders to create and reinforce aspects of culture are used to analyze systematically the culture and leadership that led to the company's fall after shocking disclosures about the company's finances.

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