The paper "Hiring and Firing System at Enron Company" is a good example of a case study on management. Enron scandal was revealed in 2001. The scandal led to the bankruptcy of Enron and the dissolution of Arthur Anderson which was among the largest five auditing and accounting firms globally. At the time, the scandal was the largest recorded bankruptcy in the history of America. The scandal was the largest audit failure at the time. Enron was among the largest companies globally and also one which fell so fast. At the time of the scandal, the complex industrial structure of the company was known to very few outsiders.
The company was founded in 1985 and was considered to be one of the most innovative companies in the late 1990s. By the end of 2001, it was revealed that the company's financial position had been sustained through institutionalized and systematic fraud which had been carried out creatively. Shareholders lost over $11 billion (Tonge, Greer & Lawton, 2003). The issues identified in the case study are; Lack of transparency, Conflict of interest Engaging with the unethical accounting firm Lack of principled executives and senior managers Unethical culture It can also be assumed that Enron’ s hiring and firing system was aimed at enhancing fraud.
The analysis of the case study will use leadership values and ethics theory while also looking at the company organizational culture. This is through looking at how what happened at can Enron be explained through leadership theories. The paper will also look at ways in which leaders influence culture and lastly, which can reduce the type of unethical behavior demonstrated in this case. 2) Findings Lack of transparency Lack of transparency about Enron's health was a major problem.
The company leadership failed to make the company status transparent and instead protected its reputation and compensation. As leaders, they had a duty of acting in good faith and providing full disclosure. For example, when Enron CEO told the employees and stakeholders that the stock prices would rise, he never disclosed that he was selling his stock (Sims & Brinkmann, 2003). The stakeholders only learned that he had sold his shares after the bankruptcy was declared. Transparency in leadership leads to trust.
Leaders are required to exercise morality and openness in all their actions (Price, 2008). Lack of transparency was a major failure for Enron's leadership. Conflict of interest The collapse of Enron was also contributed by the conflict of interest. Lack of proper oversight of the company management board contributed to the failure. The board of directors is expected to work in the interest of the shareholders. They are expected to guard the firm ethical code. This did not happen in this case where the board failed the shareholders. The company manipulation of the financial accounts went for long unnoticed due to the fact that there was a conflict of interest.
Through the use of their lawyers and accountants, the company top leadership was able to create subsidiaries. The subsidiaries looked as if they were in partnership with Enron which enabled them to sell assets while posting false earnings (Tonge, Greer & Lawton, 2003). Through the conflict of interest, it was possible for the top executives to benefit from ventures which were questionable. The ventures in most cases were used to drain the company funds.
Good leaders are expected to be ethical and effective. The leaders were supposed to act with moral intention while employing their competence (Price, 2008).
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