“Enron Ethical Collapse: Lessons for Leadership Educators”

What is the nature of Enron as a business enterprise?

Enron Corporation is known to be one of the largest integrated natural gas and electricity
companies in the world before they filed bankruptcy in 2001. Enron managed the world's largest
portfolio of natural gas risk management contracts and pioneered innovative trading products.
The company was on Fortune's "Most Innovative" in the United States listing for several years
running and reached #7 on the Fortune 500 list in 2000. Its bankruptcy in December 2001 was
the largest such filing in United States history.

They are offering/marketing natural gas liquids around the world and operated one of the largest
natural gas transmission systems in the world. It was also one of the largest independent
developers and producers of electricity in the world, a major supplier of solar and wind
renewable energy worldwide, serving both industrial and emerging markets. After a surge of
growth in the early 1990s, the company ran into difficulties. The magnitude of Enron's losses
was hidden from stockholders. The company folded after a failed merger deal with Dynegy Inc.
in 2001 brought to light massive financial fraud. The company had ranked number seven on the
Fortune 500, and its failure was the biggest bankruptcy in American history. The name Enron
became synonymous with corporate greed and corruption, and its demise cost investors and
employees over $70 billion in lost capitalization and retirement benefits. Enron has since
become a well-known example of willful corporate fraud and corruption.

What are the causes of Enron’s collapse?

Enron collapsed because of the failed investments in overseas ventures and the revelation of
limited partnerships, Special Purpose Entities (SPEs) which is suspicious. This entities was
being operated by the company insiders illegally, it has the purpose of manipulating the firm’s
significant amounts on the balance sheet thus making its share price propped up. It was also
revealed that its reported financial statement was sustained by institutionalized, systematic, and
creatively planned accounting fraud, known since as the Enron scandal. However, when the
firm’s stock price began to slide, the company was unable to back its guarantees.

Enron’s top officials abused their power and privileges which mislead its followers thus making
them follow their example. There is also manipulation of information like switching account
balances in between reports to boost up their income, inconsistency of the regulation in the
company’s constitution both in internal and external, they prioritizes their own interests above
those of their employees and the public that results in the paralyzation and fraudulent operation
of Enron, and they failed to exercise or shoulder responsibility for ethical failures.

Enumerate and describe the desirable qualities of a business manager.

A business manager has the responsibility to accomplish company goals and objectives by
guiding and observing the performance of a group. To make the supervisory responsibility
credible, the business manager must possess the following characteristics and qualities:

 He must strive to comply with the ethical policies and requirements of the company.
The key values of the company were respect, integrity, communications, and
excellence. Enron also had an extensive code of ethics. Unfortunately, these values
and policies were compromised.
  He must give emphasize to leadership and followership duties and responsibilities.

 He must be able to recognize and consider not only how credibility is built and
maintained, but also how trust is destroyed and at what cost to individuals and
organizations.

 Understand basic financial concepts so that you understand how to manage money
as part of a project you have been given.

 Should know how the hierarchy works at your business, and follow the chain of
command. Make sure that you understand your duties, and to whom you report. You
should also know how the organization affects your subordinates.

 Should have a grasp of the legal implications.

 Being able to build relationship with its subordinates, you will need to know how to
manage relationships between yourself and your subordinates, as well as manage
the relationships among those who work under you. You should also know how to
develop relationships with your superiors, and coordinate relationships between
those above you and below you in the hierarchy.

State atleast two most important characteristics that you as a future business manager
should possess? Why?

For me, the two most important characteristic that I must possess as a future business
manager:

 Honesty or integrity which is part of our code of ethics, as a BSA major, we must follow
the ethical requirements and must practice professional behavior in the work field to
avoid any fraud as well as to set as a good example among our followers. Being able to
distinguish what is morally right or wrong can contribute to prevent fraud and eliminate
any misleading act.

 Possess good leadership skills, because it is diverse as to effective communication,

good collaboration with its workers, ability to lead by example, contribute to the
company and must be willing to unlock his potential. Highlighting leadership duties and
responsibilities is one way to address or prevent selfish motivation as in the case of
Enron wherein top officials use their power and privileges to satisfy their own needs or
desire thus setting aside the goal and good stability of the company.

Bendicion, Pamela M.

4BSA2