Enron Scandal

Enron and why it was a failure

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Enron and why it was a failure
Marcus E. Tucker
University of Phoenix

Enron and why it was a failure
Enron, known today as one of the biggest business failures this country has ever seen. Enron who in the late ninety??™s controlled twenty five percent of all electricity and natural gas contracts traded worldwide, and was billed by Fortune magazine as ???America??™s Most Innovative Company??™??™ for six years straight, became one of the largest bankruptcies in U.S. history in December 2001(MSN, 2008). This paper will explain how Enron failed as a company by using unethical business practices and also compare and contrast Enron??™s leadership, top management and organizational structures to certain Organizational Behavior theories.
Enron failed because it lacked proper leadership and poor decision making from its top executives. Leadership is a very important component of OB; it also is a huge reason behind Enron??™s downfall. Enron??™s top executives were good leaders; the only problem is that they were leading the company to destruction. One of the many definitions of a leader states ???Leadership is the process of influencing others to understand and agree about what needs to be done and how to do it, and the process of facilitating individual and collective efforts to accomplish shared objectives??? (). Kenneth Lay was able to accomplish this task with his people, his employees bought into his beliefs and the culture of the company. He was not only able to gain a following from his employees, but also from outsiders who were invested in his success such as the United States government. Employees were working eighty our weeks and sacrificing their today for a better tomorrow, they believed that by working for Enron that they were going to richer than they had ever imagined. If Enron??™s managers had made better decisions and had stuck to OB theories such as planning, organizing, leading and controlling they should have realized that the company was running unethically and blown the whistle on the company and its top executive officers.
Enron should have been focused on the future, building a stronger structure and using ethical procedures that would help the company grow. The structure of the Enron did not give other managers or top executives the ability to make decisions for the company. Enron??™s decisions were made by Lay or Skeeling, who had immense and unchallenged authority there should have been a board of directors who voted on the decisions and the direction of the company. If you were to compare Enron??™s structure, to a company that has high ethical standards the two companies would be identical on the surface. If you were to take a closer you look you would find that Enron priced the value of its deepwater drilling operations higher than what its reserves merited. It claimed that contracts due in the future were worth more than they were. And most famously, it hid losses in partnerships, or what were legally called ???special purpose entities ().


MSN? (2008).? Enron Scandal. Retrieved February? 22, 2009, from http://encarta.msn.com/encyclopedia_701610398_2/Enron_Scandal.html.

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