Communication for Leadership: Enron Case Study
Working for the Enron Corporation in the 1990s was a privilege, given its status as an energy giant. The company became one of America’s top publicly held corporations from a sleeping energy corporation. However, the company soon faced increasing competition seeing its profits shrink. The company’s downward trajectory was now taking provoked pressure from stakeholders witnessing the company’s executive make some of the most unethical leadership decisions in history to keep a profiting image for the company. As a result, the company went down for bankruptcy, with the leadership succumbing to lawsuits for their unethical approach to company resuscitation. This essay explores an example and flaws of unethical organizational decision-making at Enron, evaluates the ethical behaviours of company leaders, and the impact it has on company communication, goals, and strategies. It also proposes strategies grounded in systems theory principles and best practices that could have supported effective communication practices in the corporation.
Unethical decision-making by Enron’s leadership played a primary role in the sinking of the energy-trading corporation. A key example of one such decision is the adoption of dubious accounting strategies to hide the real state of the companies. The CEO, Jeffrey Skilling, and chief financial officer, Andrew Fastow, conspired to manipulate financial statements to indicate higher profits from unrealized gains (PRMIA, 2022). As a result, the company’s financial statements had records of inflated profits. Another glaring example of unethical decision-making at Enron was the transfer of the company’s challenges to limited partnerships termed special purpose entities (SPEs) created by Jeffrey Skilling and Andrew Fastow. Under the SPEs, the leadership concealed the companies declining profits and rising woes using complex accounting systems that purposed to deceive the public. Notably, regulators and investors eventually uncovered this, seeing the company plunge.
The decision-making process adopted by Enron Corporation leadership needed to improve on various fronts. It is important to note that effective communication is critical in ensuring transparency in business administration (Cardon, 2021). Enron’s leadership decision-making process had to be revised on this front. Additionally, the decision-making process did not accommodate transparency, a key ethical principle. The violation of the principles of openness especially implicated the corporation stakeholders and employees who lost their jobs. A third area for improvement was the process’s aim to realize short-term financial gains rather than the company’s long-term sustainability.
The ethical behaviours of Enron’s company leaders denoted self-interest, dishonesty, and contempt for moral and legal commitments. By manipulating financial statements, the leaders distorted the real state of the business’s finances and incorrectly represented Enron’s performance. As a result, all parties involved, including employees, shareholders, and creditors, had their trust breached and experienced significant financial losses. The unethical behaviour of Enron’s executive did not stop at this but went on to further impact its goals, communication, and strategies. First, the flawed behaviour suppressed honest communication disrupting the flow of information. Silverstein (2013) notes that the employees were discouraged from questioning or criticizing leadership decisions, hindering information flow throughout the organization. As a result, the move led to an environment of secrecy and fear, impeding collaboration and innovation. The unethical behaviour also compromised the goals and strategies of the company since the leaders opted to address short-term gains over essential goals. The leaders put forward their interests and greed over those of the corporation and the stakeholders.
It is important to note that Enron’s leadership could have subverted the fate that faced the company by employing best practices that support effective communication. Some of the strategies that the executive could have adopted include emphasizing transparency. Cordon (2021) indicates open communication promotes a good flow of information in any business setting. Additionally, honesty could have enabled the corporation’s leadership to encourage employees to give essential feedback. Cordon (2021) notes that emphasis on honesty erases fear among employees allowing them to raise critical concerns in moving a corporation in the right direction. Enron’s leadership also needed to improve in its leadership tactics as its actions could not foster ethical leadership that could have turned around the company’s woes by taking legal and prudent steps when the company was losing profits. The company collapsed based on ethical considerations that its leadership failed to embrace.
References
Cordon Peter & Julie Stevens (2021). Business Communication: Developing Leaders For A Networked World. McGraw-Hill.
Professional Risk Managers’ International Association (PRMIA) (2022). Enron. https://prmia.org/common/Uploaded%20files/ORM%20Designation/PRMIA_Enron_081522.pdf
Silverstein Ken (2013). Enron, Ethics And Today’s Corporate Values. Forbes. https://www.forbes.com/sites/kensilverstein/2013/05/14/enron-ethics-and-todays-corporate-values/?sh&sh=d83be475ab81
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