Case 9: Enron; Questionable Accounting Leads to Collapse
Minnesota School of Business
BS430 Business Ethics
November 25, 2012
1. How did the corporate culture of Enron contribute to its bankruptcy?
Effective leaders are good at getting followers to their common goals or objectives in the most effective and efficient way; unfortunately for Enron, in the end Ken Lay and Jeffery skilling were too focused on profits that nothing else mattered. In the beginnings of the company Ken and Jeff were very efficient in growing their company from a small oil and gas pipeline firm into one of the largest entities in its industry. As the company grew and so too did the demands of upper management. Ken Lay was never satisfied and always wanted more; in his efforts to achieve this he implemented coercive power to shape his corporate culture. This power was most prevolantly seen in the company’s employee review process; wittingly nicknamed “rank and yank” if employees of Enron ranked in the bottom 20% in regards to performance they would be conveniently railroaded out of the company (Baird, Jackson, & Herndon, 2013). Ken Lay only wanted the best of the best working for him; he thought he was motivating individuals to be the best they could be. In reality he was creating the perpetual conflict of interest that drove his company into bankruptcy and gave birth to the greatest financial scandal of the time.
2. Did Enron’s bankers, auditors, and attorneys contribute to Enron’s demise? If so how?
None of the scandals that took place at Enron would have been possible without the support of their attorneys, bankers, and auditors. Enron’s lawyers, Vinson & Elkins’, wrote opinion letters supporting the legality of many of their dealings. (Baird, Jackson, & Herndon, 2013) Without these letters Enron would not have been...