Ethical Leadership Case Study: The Unethical Collapse of Enron

This case study delves into the unethical behaviors that contributed to the collapse of Enron Corporation, one of the largest business scandals in American history. The analysis includes the company's involvement in the California electricity crisis, betting activities in oil markets, and the manipulation of financial reports through mark-to-market accounting. Factors such as the pursuit of innovative energy delivery methods, weaknesses in internal controls, and the exploitation of accounting loopholes are examined. The characteristics of key individuals, including their ambition and risk-taking behavior, are also discussed, highlighting how these traits contributed to the company's downfall and ultimate bankruptcy. This assignment provides a comprehensive overview of the ethical failures and leadership deficiencies that led to Enron's demise.

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Table of Contents
Unethical behaviors documented in the film...................................................................................3
Factors in the firm’s environment related to opportunities and threats contributing to unethical
behaviors..........................................................................................................................................3
Internal Factors such as resources utilization and weaknesses contributing to unethical behaviors
.........................................................................................................................................................4
Characteristics of individuals who contributed to the unethical behaviors presented in the
documentary....................................................................................................................................4
References........................................................................................................................................5

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Unethical behaviors documented in the film
The unethical behaviors are related to one of largest business scandals in the history of
America and it sheds light on the collapse of Enron Corporation in US. The unethical behaviors
included involvement of the business in the electricity crisis in California and even other
criminal activities. While interviewing McLean and Elkind along with the former employees and
executives of the company, the details of the business scandal came into limelight. It was just a
matter of 24 days until the business got bankrupt. The unethical behaviors, which led to the
business downfall has been the betting activities on the oil markets and greed for money and then
using the money for offshore accounts management (McLean and Elkind 2013). The reserves
made by Enron were gambled in the oil markets while the unethical behaviors and practices also
included using the accounting limitations by the company for manipulating and misinterpreting
the generated revenues required to make modifications to the balance sheet and provide proof
about good business performance to the Government and regulatory bodies in US.
Factors in the firm’s environment related to opportunities and threats contributing to
unethical behaviors
Jeff was more concerned about development of new ideas and so he was more focused on
new ways of deliver energy rather than allowing physical flow of oil through the pipelines. Thus,
he aimed at making Enron a kind of stock market for natural gas, which could transform the
energy into financial instruments and then traded in oil markets as stocks. It was a whole new
opportunity for earning profit and at the same time, revolutionalise the new idea to deliver
energy by thinking something big (Jurkiewicz 2015). The threat was mainly caused due to mark

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to market accounting, which though allowed the company by opening new directions to generate
high revenue for future. It was subjective and many manipulations were done The hypothetical
future value accounting was termed by Jeff Skilling for mark to market accounting, which
enabled making manipulations to financial reports and showing others about a certain profit,
though the actual profit gained is something different and much more than actually appeared
(Hays and Ariail 2013).
Internal Factors such as resources utilization and weaknesses contributing to unethical
behaviors
The factors considered as internal included the human resources and traders. From the
video, it could be understood that 15 percent of the employees were terminated and the superiors
were provided with huge bonuses, which might have even infuriated the others. Another
weaknesses was that the workers carried out following the values and beliefs of Jeff and turned
those into ideology. The open transparent market was another weakness while getting involved
in gambling was another major issue that resulted in unethical behaviors. While looking at the
Excel sheet and reports, there were several manipulations related to the stock and showed
spending for the purpose of gambling (Brown and Carrabine, 2017). This proved that the assets
were mis-utilised and the business downfall was nearby as expected from the documentary. The
investors’ money were utilized for drawing profit and later there was no rate of return due to lack
of earning and inability to pay furthermore contributed to the bankruptcy within just few weeks.

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Characteristics of individuals who contributed to the unethical behaviors presented in the
documentary
Jeff Billing even got involved with individuals who make deals associated with the
trading business and stock markets, which further resulted in manipulations and inappropriate
use of finances. Few of the characteristics include high ambition and desire for investing in India
to open a power plant and manage natural gas operations effectively. India was not capable that
time to pay such amount of money, due to which, the project stopped. The profit margin between
Enron and other companies was so huge that most of the other competitors became enemies.
Enron tried to reach extended heights by managing broadband services, electricity and other
business aspects too for making profit (McLean and Elkind, 2013). There stock value of Enron
rose heavily and it was a tremendous success for the company. There were other deals with
Blockbuster and other business, but not much was achieved due to which stocks were sold at
lesser prices (Jurkiewicz 2015). The stock price fell tremendously and there were evidences of
Enron being overpriced, which finally lead to unethical behaviors and business downfall.

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References
Brown, M. and Carrabine, E., 2017. Key methods of visual criminology: an overview of different
approaches and their affordances. In Routledge International Handbook of Visual Criminology
(pp. 84-95). Routledge.
Hays, J.B. and Ariail, D.L., 2013. Enron Should Not Have Been a Surprise and the Next Major
Fraud Should Not Be Either. Journal of Accounting and Finance, 13(3), pp.134-145.
Jurkiewicz, C.L., 2015. The foundations of organizational evil. Routledge.
McLean, B. and Elkind, P., 2013. The smartest guys in the room: The amazing rise and
scandalous fall of Enron. Penguin.