Analysis of Ethical Violations: The Enron Corporation Case

This report provides an in-depth analysis of the Enron Corporation scandal, examining the unethical practices that led to its downfall. It begins with a brief overview of Enron's history and operations, highlighting its initial success and eventual collapse due to bankruptcy. The report identifies key decision-makers, including Jeffrey Skilling, Mark Frevert, and Lawrence 'Greg' Whalley, and analyzes their leadership values, which were heavily influenced by unethical behaviors. The analysis focuses on the company's focus on financial gains, lack of ethical standards, and disregard for employee well-being. The report recommends building a culture of integrity, maintaining transparency, rewarding ethical practices, and enhancing the workplace to reduce ethical violations. The conclusion emphasizes that Enron's collapse resulted from unethical decisions and practices, and it suggests that the company could have succeeded if it had prioritized ethical conduct and stakeholder interests. The report references key sources to support its findings.

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Executive summary
This paper sheds a light on the Enron Corporation scandal and provides a brief history of the
case study. The paper focuses on the unethical practices that had led the successful company
to collapse and face other consequences. The paper analyzes the sandal and provides
recommendation that help organizations to reduce ethical violations in their workplace in
order to gain profits by ethical means and gain a positive reputation in the market which helps
organizations to strive successfully in the competitive market.

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Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Brief overview of the case study of Enron Corporation........................................................3
Decision makers of Enron Corporation..................................................................................3
Leadership values of Enron Corporation...............................................................................4
Analysis of the organization...................................................................................................4
Recommendation....................................................................................................................5
Conclusion..................................................................................................................................5

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Introduction
Ethics is a vital aspect of every organization and most organizations in recent times focus on
ethics for the smooth operations and the positive reputation of the organization. Business
ethics mainly focuses on the policies of the business and the practices regarding the potential
controversial subjects like corporate social responsibility, bribery, fiduciary responsibilities,
fiduciary responsibilities and insider training (Belak, 2013). Business ethics provide basic
guidelines that organizations choose in order to gain approval from the consumers (Grace &
Cohen, 2015). This paper is going to focus on the downfall of the company; Enron
Corporation due to unethical practices incorporated by the company and analyze the mistakes
that led to this disaster.
Discussion
Brief overview of the case study of Enron Corporation
Enron was an America energy, services and commodities company which was located in
Houston, Texas. The company was founded in the year 1985 and had around 29,000
employees working under them. The company mainly bought and sold energy. They used
Wall Street in order to transform the energy supplies to financial instruments that were traded
online like bonds and stocks (Nytimes.com, 2019). Enron was one of the most successful
companies with revenue of about $101 billion during the year 2000. Enron was considered to
be the most innovative company.
However, Enron collapsed in the year 2001 due to bankruptcy. The success of trading energy
made Enron feel that they could trade anything. High-speed data transmission, insurance risk,
newsprint and television advertising were all turned into contracts that were known as
derivatives and were sold to their investors. Enron spent billions on the trading ventures
where most of them failed which led to losses.
In order to earn profits and keep their stocks growing, Enron invested in a joint venture with
the company, Blockbuster which later flopped. In the meantime the company the company
secretly partnered with the Canadian bank where the company was provided with a loan of
$115 million in exchange of the profits generated by Enron (Nytimes.com, 2019). There were
many other scandals related to other corporate corruption, misrepresentation in the earning
reports, embezzlement that was undertaken by the executives of Enron and fraudulent crisis
of energy that was reported. The CEO of the company was sentenced for 24 years for the
scandal and in October 2001 the company collapsed due to the unethical practices and
operations of the company.
Decision makers of Enron Corporation

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The key people who were the main decision makers of Enron were Jeffrey Skilling who was
the CEO and the President of the organization, Mark Frevert, Vice Chairman and Lawrence
‘Greg’ Whalley, Chief Operating Officer (the Guardian, 2019).
The decision made by these people was one of the major reasons for the downfall of one of
the most successful organizations of that time. The key people of the company were
successful in innovating ideas however was poor at executing and running a business. They
made poor and unethical decisions and chose unethical means to generate profits. The
company would build assets and immediately claimed the asset generated them huge amounts
of profit whereas they did not generate any money from the assets. They focused on hiding
loses instead of making efficient decisions and positive changes to overcome the issues that
were cropping up in the business. In order to generate profits the key decision makers of the
company resorted to unethical methods as they created a supply and demand gap which
resulted in energy crisis in the country. They took their power plants offline and told people
they were down for maintenance so that when the demand of electricity would become high
they could sell the power at an exorbitant price.
The decision makers of the company were unethical in their practices and operated only for
their own benefits. They lacked vision and far sight and did not think about the company.
They were incompetent thus failed to make proper business strategies to manage the crisis
and overcome the issues. This led to the company to face huge consequences in the market
like the downfall and also the imprisonment of the CEO.
Leadership values of Enron Corporation
Leaders understand the things they value and also understand the importance of ethics in the
workplace. According to scholars, good leaders exhibit their ethics and core values in their
actions and styles (Meyer et al, 2016). It is said that decision making of a person is often
influenced by the values and beliefs of the person.
It has been seen that the leaders of the company, Enron Corporation are highly influenced by
unethical values and practice unethical behaviors. It is the duty of the leader to make efficient
decisions that help to shape up a business for profits and also make strategic decisions during
crisis for the overall development of the company (Ciulla, 2013). However, it has been seen
that the leaders of Enron failed to operate the business successfully. The leaders did not
maintain any transparency, they did not put any efforts to change and make effective
decisions to manage the crisis rather they made illogical decisions and dishonest in their
approach. The greed of the leaders resulted in the downfall of one of the most successful
companies during that time.
Analysis of the organization
Enron Corporation only focused on financial gains and did not follow any ethical standards.
They aimed at gaining profits by any means even if the approach was unethical and illegal.
The organization did not focus on increasing their economic value. The companies were not

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concerned about the desires, well-being and the values of the employees of the company.
Enron also tried to keep the information discreet from the public and made sure the
employees also dominated the employees. The competition in the market also led Enron to
make these errors which contributed to the financial condition of the organization.
Recommendation
Enron Corporation in order to survive in the market and overcome the crisis situation should
have taken measurable steps in order to reduce the ethical violations that they made. These
steps are the following:
 Build a culture of integrity- In order to reduce ethical violation, an organization needs
to encourage and promote honesty and moral principles within the organization so
that the employees and the people associated with the organization work with full
conviction to make sure that that the outcomes are beneficial for both the organization
and their stakeholders.
 Maintain transparency- It is important for the organization to maintain transparency in
the organization so that there is a relationship of trust among the employees which
helps in the fruitful outcomes aligning with the ethical standards.
 Rewards for ethical practice- To promote ethical practices organizations can reward
employees on the basis of their ethical conduct which will motivate others to perform
ethically in the workplace.
 Enhance the workplace- It is important for leaders to perform work ethically and
influence others to do the same. Ethical measures create a better workplace that helps
in achieving the goals of the organization keeping the interest of the stakeholders
intact as well.
If these measures would have been taken by Enron then they would have been able to retain
their positive position in the market and would pave way for the success of the organization.
Conclusion
Enron Corporation was one of the most successful companies in the United States however
collapsed because of the unethical decisions and practices that the organization encouraged
and practiced in order to gain financial gains. Enron would have been a successful company
and would have expanded if they would not have resorted to unethical practices and would be
genuinely concerned about their business and their stakeholders.

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Reference
Belak, J. (2013). Corporate governance and the practice of business ethics in Slovenia.
Systemic Practice and Action Research, 26(6), 527-535.
Ciulla, J. B. (2013). Leadership ethics. International Encyclopedia of Ethics, 1-7.
Grace, D., & Cohen, S. (2015). Business ethics.
Meyer, B., Burtscher, M. J., Jonas, K., Feese, S., Arnrich, B., Tröster, G., & Schermuly, C. C.
(2016). What good leaders actually do: micro-level leadership behaviour, leader
evaluations, and team decision quality. European Journal of Work and
Organizational Psychology, 25(6), 773-789.
Nytimes.com. (2019). Opinion | Enron for Dummies. Retrieved 25 August 2019, from
https://www.nytimes.com/2002/01/26/opinion/enron-for-dummies.html
the Guardian. (2019). Enron: key players. Retrieved 25 August 2019, from
https://www.theguardian.com/business/2002/jan/13/corporatefraud.enron

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Appendix