Examining a Business Failure
Greed was the main motivation of Enron executives, which led to the result, failure. Every person in upper level management of the company saw a way to obtain some money and performed in an unethical manner to ensure that obtaining that extra money would not negatively reflect on him or her. ???The SEC is investigating shady deals in which they allegedly enriched themselves, and formed partnerships designed to hide $500 million in losses??? (Infinite Energy, 2010, para. 4). Skillful crafting of accounting documents was done to make the company look more profitable than it was, and the accounting firm of Arthur Andersen chose to overlook incorrect accounting entries. The Infinite Energy website says that accounting practices deliberately obscured profit and loss to confuse stockholders and regulators (Infinite Energy, 2010). Companies like Arthur Andersen, Vinson and Elkins, and Merrill Lynch were paid huge sums of money to ensure that Enron had a positive appearance to stockholders and the public (Castelarhost, 2005, para. 1). ???The most important lesson from the Enron collapse is both the centrality and fragility of organizational trust??? (Curral & Epstein, 2003, p. 1).
Misuse of Trust
In every organization, upper level managers are the leaders who give the instructions for business operation to lower level managers and his or her subordinates to implement the actions necessary to operate a business successfully. Every company employee depends on the leadership of his or her manager to provide a plan to achieve the vision of the company. Wholeheartedly trusting leadership personnel is a guaranteed plan for disaster unless safeguards are in place to ensure the ethical operation of the business. Curral and Epstein (2003) remind readers that everyone knows people prone to selfishness and have agendas that may put his or her own interests first.
After the Failure
Enron??™s juggling act came to an end when the company filed for bankruptcy in December 2001. The company executives could no longer portray shady business deals as legitimate. The unethical behavior and way of doing business culminated in the exposure of the stock value being significantly lower than it was. The company could no longer hide business losses hidden by the dummy corporations created by Enron.
At the heart of Enrons demise was the creation of partnerships with shell companies with names like Chewco and JEDI, inspired by Star Wars characters. These shell companies, run by Enron executives who profited richly from them, allowed Enron to keep hundreds of millions of dollars in debt off its books (TIME, 2010, para. 4).
Organizational behavior, or the behavior of the executives charged with operating the company caused the failure. ???Organizational behavior not only introduces a comprehensive set of concepts and theories; it has to deal with a lot of commonly accepted ???facts??? about human behavior and organizations that people have acquired over the years??? (Robbins & Judge, 2007, p. 11). The failure of Enron caused the company to close the doors and add thousands of people to the list of jobless people. The actions of company leaders, made devastating events happen in the lives of the company??™s workers??™.
Enron??™s executives made some very daring moves that worked for a while and made the company seem very profitable. It was a farce that brought the downfall of a corporate giant. Enron was a company sought by new college graduates because people believed that his or her career would grow exponentially and endless opportunities would exist. The public held Enron on a pedestal not knowing the shady dealings of company executives. The inappropriate behavior of company executives was the cause of the company??™s failure. Thousands of people were left without jobs or retirement funds. People found themselves starting over even though many years were spent as employees of Enron. Although the company executives went to prison and so did the conspirators at the accounting firm and a few others that helped the farce work as long as it did, the damage done to people??™s lives is unmentionable.
Castelarhost.com. (2005). Enron: Questionable Accounting Leads to Collapse. Retrieved from http://articles.castelarhost.com/enron_questionable_accounting_leads_to_collapse.htm
Currall, S. C. & Epstein, M. J. (2003). The Fragility of Organizational Trust: Lessons from the Rise and Fall of Enron. Retrieved from http://www.stevecurrall.com/pdf/Currall_OD_LessonsEnron.pdf
Infinite Energy. (2010). Lessons from the Enron Collapse. Retrieved from http://www.infinite-energy.com/iemagazine/issue41/enron.html
Robbins, S. P. & Judge, T. A. (2007). Organizational Behavior (12th ed.) Upper Saddle River, NJ: Pearson Education.
TIME. (2010). Enron: Whos Accountable Retrieved from http://www.time.com/time/business/article/0,8599,193520,00.html