Enron Company, Essay Example

The Unethical Leadership at Enron

Enron comprises an Energy company based in Texas. The Enron Company was mainly involved in the provision of various products and services. Some of the products include natural gas, power, and communication equipment to both wholesalers and retailers. The senior managers mainly abused power through the manipulation of accounting information. The officials were corrupt thus unable to oversee the company’s daily operations as per the expectation. Through corruption, the officials prioritized their interests, thus neglecting their employees and the general public. Instead, the company’s senior officials would have maintained their integrity and professionalism to ensure its growth through profit maximization.

The company was experiencing some struggles, which began after the officials declared their first loss and when the accounting department concealed the company’s debt information to the audit experts. The company started partnerships with other corporations to ensure that debt and incurred losses would not appear in their accounting records. After the continuous making of losses, various stakeholders were angered by the poor performance, which led to the chief executive officer’s resignation. Andersen, the company’s auditing firm, collaborated with the officials in misappropriation and alteration of the accounting records. Their main goal was to obtain stakeholder’s money through corruption.  Following unending complaints from the stakeholders, the United States (US) government began investigations concerning its financial status. Government involvement led to the arrest of the chief executive officer and the board members. Due to massive fraud, the company was declared bankrupt by the US government. As a result of bankruptcy, many people lost their jobs and their investments within the company. However, the employees were prohibited by their seniors against selling their shares when the value was lower. The senior officials provided false information to employees as a tactic of siphoning the company’s funds. The officials advised their employees not to sell their shares, while in reality, the top officials were selling their shares (Thomas).

The Enron leaders were dishonest during the company’s daily operations. The top officials collaborated with the auditing firm to ensure that the actual accounting information was hidden from various stakeholders such as the employees. It was evident that its indebt state was not communicated to the employees. Besides, the balance sheet information was obtained through the inclusion of other company’s information. To ensure its steady growth, the officials would have maintained honesty in the company’s daily operations. Enron’s leaders practiced forgery during their period of service. It was seen when the seniors presented the Special Purpose Entity Company’s accounting information instead of actual information of their company. Abuse of power was evident in the company among different leaders. The serving Chief Executive Officer (CEO) ejected other leaders from office whenever he felt they were a threat to him. The junior staff was mistreated through intimidation upon any inquiries towards their seniors.

Besides, the board members abused power by failing to question any actions considered right by management. The reward of excess and unnecessary privileges was seen among the leaders within the company. The board members and the CEO offered themselves huge allowances and monetary benefits in the name of privileges. Also, they borrowed huge loans from the firm without repayment, thus affecting its financial status. Unprofessionalism was also evident among the company leaders. The acting CEO Lay and the board members manipulate the accounting information to cater to their firm’s interests. Besides, they claimed that they were aware of the illegal partnership between their firm and Special Purpose Unity Company. The leaders within the company were corrupt in various ways. First, they acquired illegal nonexistent profits from the firm. Through access to the accounting records, they were able to channel funds into their accounts. These behaviors were done without the stakeholder’s knowledge. Besides, they concealed any expenses incurred in a given period within the firm. Also, the leaders provided false information to the firm’s energy regulators. Unfair treatment of employees by leaders was unethical. The employees were not allowed to buy and sell their shares freely within the company. The officials forced the employees to invest their shares in the firm when prices were low. However, they were not allowed to sell when the share price was high. These tactics were used to ensure the leaders got a chance to sell shares without employees’ knowledge. Reward of inappropriate loyalties was evident among the firm’s leaders. The officials rewarded themselves with huge and better loyalties than their employees. Thus, they betrayed the company’s success by misusing funds through their reward systems. The board members encouraged the employees to save shares in the firm while at the same time they carried out withdrawals of their shares. The reward of excess loyalties ended up in the firm’s bankruptcy that left many jobless with their investments lost to the company.The acting leaders would have invested their shares into the firm to promote growth and continuity, contrary to their selling of shares. The leaders had irresponsible behavior within the organization. Both the CEO and the board members did not perform their oversight duties as expected. The board members were ignorant of the firm’s financial woes. Also, the board members did not challenge the audit process and results. The auditing company collaborated with the CEO and the board members without the employees’ consent. To promote transparency, the leaders would have communicated the actual company’s status to their employees (Thomas).

From the firm’s situation, the greatest learning point was the unprofessional leadership. According to the firm’s information, the acting leaders were unprofessional in various ways within their operations. Lack of integrity by the board chairman and the CEO led to misuse of operations funds. Continuous misappropriation of funds led to the firm bankruptcy declaration and retrenchment of employees. Senior management officials should uphold integrity regardless of their management levels to encourage profit maximization within the firm. Besides, unprofessional leadership was evident through the abuse of power by the acting leaders. They misused power by sidelining their employees in various firm’s decisions. The senior management team should involve their employees in the company’s decisions to promote transparency. Also, Forgery of accounting information was revealed within the company. The top officials engaged foreign companies in the concealment of their existing false information. For proper performance within the firm, the officials should communicate the actual information to the employees. Leaders should facilitate communication of legitimate information and help in profit maximization through increased productivity.  The unprofessional leadership was evident through the leaders’ misuse of power. The board members and the CEO used their positions in manipulation of their employees. The employees were denied their shares’ freedom. To achieve the set objective, leaders should promote the employees’ freedom of their shares within the company. They should not be harassed on matters about their investments to encourage internal investments within the company. Unprofessional leadership was evident through concealment of the losses incurred in every financial year. It was used as a tactic to maintain high prices of shares that were maintained within the company. Maintenance of high share price was a technique for the board members to benefit. Top management officials should include the losses suffered in their authentic accounting books.

In conclusion, Enron’s leaders abused their power during their time in office. They altered the firm’s accounting information for their gains, which eventually led to its closure. The appointed management team should work in professionalism to promote equality and the company’s growth.

Work Cited

Thomas, C. William. “The rise and fall of Enron.” Journal Of Accountancy-New York- 193.4 (2002): 41-52.