Case 1a_Enron_Seminar1_Sims and Brinkmann_FEKH15.pdf - Enron Ethics(Or Culture Matters More than Codes ABSTRACT This paper describes and discusses the

Case 1a_Enron_Seminar1_Sims and Brinkmann_FEKH15.pdf -...

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ABSTRACT. This paper describes and discusses the Enron Corporation debacle. The paper presents the business ethics background and leadership mechanisms affecting Enron’s collapse and eventual bankruptcy. Through a systematic analysis of the organizational culture at Enron (following Schein’s frame of refer- ence) the paper demonstrates how the company’s culture had profound effects on the ethics of its employees. Now, when most people hear the word “Enron” they think of corruption on a colossal scale – a company where a handful of highly paid execu- tives were able to pocket millions of dollars while carelessly eroding the life-savings of thousands of unwitting employees. Not long ago, the same company had been heralded as a paragon of cor- porate responsibility and ethics – successful, driven, focused, philanthropic and environmen- tally responsible. Enron appeared to represent the best a 21st century organization had to offer, economically and ethically. The questions become, how did Enron lose both its econom- ical and ethical status? Is it because of its very size and effects? Is it the direct harm to primary and secondary stakeholders? Or, is it the worldwide media coverage that the Enron demise has drawn? These questions make the Enron case interesting to us as business ethicists. At first sight, Enron looks like a mega-size illustration of the bad apple and/or the bad barrel disease and, hence, looks like good marketing for the business ethics business (which almost has a vested interest in such scandals and other bad examples). The problem is, however, that Enron looked like an excellent corporate citizen, with all the corporate social responsibility (CSR) and business ethics tools and status symbols in place. Enron Ethics (an ironic expression which is used now and then, see e.g. the headings of Tracinski, 2002 or Berenbeim in Executive action no. 15, Feb. 2002) reads like the new catchword for the ultimate contradiction between words and deeds, between a deceiving glossy facade and a rotten structure behind, like a definite good-bye to naive business ethics. Enron ethics means (still ironically) that business ethics is a question of organizational “deep” culture rather than of cultural artifacts like ethics codes, ethics officers and the like. With this as a backdrop, the paper will describe and discuss how executives at Enron in practice created an organizational culture that put the bottom line ahead of ethical behavior and doing what’s right. More specifically, the paper first provides a brief background on Enron and its rise and fall. Next, the paper systematically uses Schein’s (1985) five primary mechanisms available to leaders to create and reinforce aspects of culture (i.e., attention focusing, reaction to crises, role modeling, rewards allocation and criteria for hiring and firing) to analyze the company’s culture and leadership that con- tributed to it’s ethical demise and filing for bank- ruptcy. It is our contention, that with such a point of departure one will be better prepared
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