1) What had been the individual elements that contributed to the failure of Enron? Briefly describe two important factors.
Enron collapsed mostly because of the underhanded practices of its management. Egoism (Self interest) was one of the major elements contributed to the failure of Enron. Enron’s executives place their own hobbies above those of their workers, company and the auto industry, and failed to exercise appropriate oversight or perhaps shoulder responsibility for moral failings. They allowed themselves to be motivated much more by what would gain themselves than what would truly benefit the organization.
Money, greed, arrogance and hubris led company professionals to lose give attention to working for the good of the business and to act unethically (Gini, 2004). Abuse of power to make decisions which were beneficial economically and politically to themselves as well as the company, was one of the crucial factors that led to Enron’s failure.
Organization leaders employed insider details and exchanged millions of dollars in company share, borrowed by subsidiaries without intent to pay back the financial loans (Wilke, 2002), and avoiding federal income taxes even though some of its subsidiaries, like Portland General Electric, collected taxes payment from customers (Manning & Hll, 2002).
Such actions of moral failure at the top and irresponsible behaviors led to the collapse of Enron. The unethical behavior of Enron’s leaders is apparently the product of both specific and situational factors. Avarice was the major motivator of both managers and their subordinates at Enron (Cruver, 2002).
Optimistic revenue reports, hidden losses and also other tactics had been all created to keep the share price artificially high. Lofty stock values justified generous salaries and perks, deflected unwanted overview, and allowed insiders to profit from their very own stock options. Greed was not limited to top Enron executives, on the other hand. Meeting profits targets induced large additional bonuses for managers throughout the firm, bonuses that have been sometimes larger than employees’ wages. Rising stock prices and extravagant rewards caused it to be easier intended for followers and also leaders to overlook flaws in the industry’s ethics and business model.
2) What had been the organizational factors that contributed to the failure ofEnron? Briefly explain two key factors.
Command, Culture and Management settings were the key organizational factors that contributed to the inability of Enron. Company executives and managers directly effect the moral direction of the company. If the executives and managers will be ethical, workers are more likely to take action ethically. Every time a company does not have committed honest leadership, as did Enron, ethical requirements will not be taken care of. Because Enron lacked moral leadership, this experienced an explanation in its business structure and culture (Gini, 2004). At some point, the entire business collapsed consequently. Enron developed culture enthusiastic about the bottom line rather than with honest behavior. The organization culture demanded conformity and penalized dissent. Consequently, workers adopted and complied while using culture required by the business leaders.
When leadership features crossed the queue to unethical behavior, dishonest acts could become accepted in daily activities and employees have sufficient reason for staying quiet. The machine (a harsh variant of just one used for many companies) encouraged aggressive competition and silenced dissent. Followers had been afraid to question underhanded and or against the law practices pertaining to fear of losing their careers. Instead, these were rewarded for his or her unthinking loyalty to their managers (who positioned their performance) and the company as a whole (Fusaro & Miller, 2002). Get the most out of earnings was aggressively taken to this kind of extreme that the leadership feature of honesty became a non-factor within the culture in Enron.
This lack of honesty was a serious flaw within the organizational composition and lifestyle of the business for whilst important group members, like Andrew Fastow, began coming across situations needing the honest disclosure of financial information; handful of employees or perhaps group associates were provided with the exterior motivation from Skilling’s command to tell the truth regarding Enron’s actual financial situation. Those individuals that would have the integrity to speak seriously about Enron’s financial deficits were terminated, demoted, or summarily terminated by individuals in electric power in a method known inside the Enron lexicon as “rank and yank
3) What were the social elements that contributed to the failing of Enron? Briefly explain two crucial factors.
Coming from a group point of view, Enron’s professionals and workers were affected by groupthink. Groupthink requires group associates hiding or perhaps discounting information to maintain group cohesion. The group people collectively overestimate the group’s morality and ability, ignore contradictory data, and pressure each other to preserve conformity. The company hired and promoted those who were highly motivated by monetary rewards and special offers.
Enron after that provided the employees with incentives to take risks and focus on making profits, no matter the means. Anderson audit company also enjoyed part in the downfall of Enron. When the accounting company found out about the scandal, they must have said “NO to Enron and should possess reported SECURITIES AND EXCHANGE COMMISSION’S. Instead, they took their share of money to help to hide Enron’s debts and losses. Enron’s failure was disastrous in many respect. Thousands of people lost their jobs and their retirement living savings, the power industry was greatly influenced. The greatest destruction was to peoples’ trust in businesses and their innovator.