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The Enron Scandal: Watching the Commercial Bubble Burst

Abstract

The Enron scandal has become a notorious case of the 21st-century entrepreneurship. Although the concept of a financial fraud itself cannot be considered something out of the ordinary, it was unexpected to witness a global company deciding to choose this avenue to manage its financial issues.

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Despite the fact that the case of Enron is traditionally viewed from an economic perspective, a closer analysis of the social interactions between the company’s members will reveal that Enron could have used a better set of principles for organizational behavior and corporate ethics.

Introduction

The notorious Enron scandal is not simply well known by state authorities and business organizations alike, but also can be considered one of the most infamous instances of corporate fraud in the 20th century.

Although the case of Enron is typically viewed as a clear-cut example of a financial fraud taken to a new level, it should also be viewed as a study in corporate ethics – or, to be more exact, the lack thereof – and the significance of promoting sustainability within the organization in terms of interpersonal relationships as well as relationships between the key stakeholders as opposed to resorting to morally questionable strategies.

Major Points: Enron as a Classic Disaster

By concealing the fact that the organization was suffering severe losses, the company leaders tricked the shareholders into thinking that the organization was going to succeed in the target market.

As a result, after the company went public and the general population could own a part of the company with the help of the stocks that they bought, the organization was starting to recover from its financial crisis, yet the strategy chosen by the organization was not enough to succeed without putting any actual effort into the provision of services and satisfying the target customers. Consequently, the Enron bubble burst, a range of people, who bought the company’s shares, was left with the shares that cost nothing (Yuhao, 2010) literally.

Therefore, when it comes to defining what made Enron so unfortunate in its attempts to identify an appropriate financial strategy and use its assets for overcoming the crisis, one must point at the fact that the organization lacked a set of rules for organizational behavior. Particularly, Enron could have made use of a more efficient set of corporate ethics principles (Guliani, 2014).

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Solutions to the Enron Embarrassment

Since the lack of a proper organizational behavior model due to the inconsistency of Enron’s ethical code can be defined as the key factor that affected the company’s failure as a public entrepreneurship, it is reasonable to assume that the strategy allowing for the enhancement of ethical principles within the organization could have saved Enron from its failure.

The incorporation of the basic ethical code into the company’s operations could have saved the company managers from considering a financial fraud as a possible solution to Enron’s problems.

Moreover, in order to affect the company’s organizational behavior and to promote a better model for the staff and the company’s managers to comply with, the leaders of Enron should have considered the opportunity for changing the leadership model that they adhered to in the course of managing the issue under analysis.

Particularly, the transition to the transformative leadership model should have been viewed as the most reasonable choice to make. With the transfer to the specified model, the company’s leaders could have affected the staff’s motivation significantly, therefore, promoting clarity and efficiency as the two most significant concepts for the organization to be based on (Eghdarny, 2013).

Speaking of which, Enron would have benefitted greatly from clarity as to the foundation for its operations in the environment of the public sector. If the basic principles of clarity and corporate ethics had been incorporated into the framework of Enron’s operations, the issue, which the organization had to face in terms of its unethical and illegal actions, would have never occurred, as the company would have never resorted to solving the specified issue in an illegal way (Elliott, Marquis, & Neal, 2013).

In addition, the introduction of proper principles of organizational behavior would have made customer satisfaction and the development of customer relationships along with the promotion of trustworthiness as the key quality of the company the top priorities of the organization (Kambiz & Sadeghian, 2014).

Moreover, the further promotion of corporate social responsibility would have become an option (Filatotchev & Nakajima, 2014). In the specified scenario, carrying out the financial fraud that Enron was accused of would have been practically impossible; therefore, it can be assumed that a flaw in the design of organizational behavior patterns triggered the organization’s untimely demise.

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Conclusion

While the case of Enron and its demise, which was quite infamous and untimely, is traditionally interpreted as a study in economics and a lesson in designing a flexible corporate strategy, it, in fact, also offers a lot of food for thoughts in terms of the ethical dilemmas, which it raises. The case of Enron can be considered a prime example of the absence of corporate ethics and the sense of corporate social responsibility within the organization.

Although the specified step could be interpreted as the final refuge of the organization that was literally collapsing due to the lack of profit, Enron could have still chosen different and more honest ways of addressing the economic and financial concerns that it was facing at the time.

However, by choosing the option that deprived every single stakeholder within the organization except for its members of an opportunity to gain benefit, the company engaged in a financial fraud that will be remembered long as one of the most deceitful and ethically unacceptable steps taken by globally acclaimed entrepreneurship.

Reference List

Eghdarny, H. (2013). Transformative leadership. Interdisciplinary Journal of Contemporary Research in Business, 4(9), 93–98.

Elliott, T. L., Marquis, L. M. & Neal, C. S. (2013). Business ethics perspectives: faculty plagiarism and fraud. Journal of Business Ethics, 112(1), 91–99.

Filatotchev, I. & Nakajima, C. (2014). Corporate governance, responsible managerial behavior, and CSR: Organizational efficiency versus organizational legitimacy? Academy of Management Perspectives, 28(3), 289–306.

Guliani, L. (2014). Organisational ethics: Paradigm for corporate social responsibility. International Journal of Organizational Behaviour & Management Perspectives, 3(3), 1116–1121.

Kambiz, H. H. & Sadeghian, M. (2014). The impact of corporate social responsibility on customer satisfaction and corporate reputation in automotive industry. Journal of Islamic Marketing, 5(1), 125–143.

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Yuhao, L. (2010). The case analysis of the scandal of Enron. International Journal of Business and Management, 5(10), 37–. 41.

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StudyCorgi. (2020, October 21). The Enron Scandal: Watching the Commercial Bubble Burst. Retrieved from https://studycorgi.com/the-enron-scandal-watching-the-commercial-bubble-burst/

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StudyCorgi. (2020, October 21). The Enron Scandal: Watching the Commercial Bubble Burst. https://studycorgi.com/the-enron-scandal-watching-the-commercial-bubble-burst/

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"The Enron Scandal: Watching the Commercial Bubble Burst." StudyCorgi, 21 Oct. 2020, studycorgi.com/the-enron-scandal-watching-the-commercial-bubble-burst/.

1. StudyCorgi. "The Enron Scandal: Watching the Commercial Bubble Burst." October 21, 2020. https://studycorgi.com/the-enron-scandal-watching-the-commercial-bubble-burst/.


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StudyCorgi. "The Enron Scandal: Watching the Commercial Bubble Burst." October 21, 2020. https://studycorgi.com/the-enron-scandal-watching-the-commercial-bubble-burst/.

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StudyCorgi. 2020. "The Enron Scandal: Watching the Commercial Bubble Burst." October 21, 2020. https://studycorgi.com/the-enron-scandal-watching-the-commercial-bubble-burst/.

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StudyCorgi. (2020) 'The Enron Scandal: Watching the Commercial Bubble Burst'. 21 October.

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