case study on Enron, ethics and organizational culture .

1. Case: Enron, Ethics, and Organizational Culture
September2,2014
1
Case
On
Enron, Ethics and Organizational Culture
Date Of Submission:
02.09.2014

2. Case: Enron, Ethics, and Organizational Culture
September2,2014
2
SUBMITTED TO
Md. Arafater RahmanBhuiyan
Assistant Professor andChairman
Department of Human Resource Management
Bangladesh University ofBusiness & Technology (BUBT)
SUBMITTED BY
GROUP NAME: Senior
NAME ID INTAKE
Farid Uddin Bhuiyan 10112101082 24th
Tousif Abdullah Autul 10112101059 24th
Shajia Afrin 10112101072 24th
Md Ziauddin Zilani 10112101025 24th
Md. Tusar Mazumder 10112101002 24th
Md. Sala Uddin 10112101100 24th
Tahfimul Islam 10112101065 23rd

3. Case: Enron, Ethics, and Organizational Culture
September2,2014
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Table Of Contents
No. Page
1. Company Overview
I. Vision
II. Values
III. Principles of Human Rights
4
4
4
5
2. Case 6-7
3. Question & Answer 8-9
4. Findings 10
5. Recommendation 10
6. Conclusion 11

4. Case: Enron, Ethics, and Organizational Culture
September2,2014
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Company Overview
Enron Corporation (former New York Stock Exchange ticker symbol ENE) was an
American energy, commodities, and Services Company based in Houston, Texas.
Before its bankruptcy on December 2, 2001, Enron employed approximately 20,000
staff and was one of the world's major electricity, natural gas, communications, and pulp
and paper companies, with claimed revenues of nearly $111 billion during 2000.Fortune
named Enron "America's Most Innovative Company" for six consecutive years.
At the end of 2001, it was revealed that its reported financial condition was sustained
substantially by an institutionalized, systematic, and creatively planned accounting
fraud, known since as the Enron scandal. Enron has since become a well-known
example of willful corporate fraud and corruption. The scandal also brought into
questions the accounting practices and activities of many corporations in the United
States and was a factor in the creation of the Sarbanes–Oxley Act of 2002. The scandal
also affected the greater business world by causing the dissolution of the Arthur
Andersen accounting company.
Enron filed for bankruptcy protection in the Southern District of New York during late
2001 and selected Weil, Gotshal & Manges as its bankruptcy counsel. It ended its
bankruptcy during November 2004, pursuant to a court-approved plan of reorganization,
after one of the most complex bankruptcy cases in U.S. history. A new board of
directors changed the name of Enron to Enron Creditors Recovery Corp., and
emphasized reorganizing and liquidating certain operations and assets of the pre-
bankruptcy Enron. On September 7, 2006, Enron sold Prisma Energy International Inc.,
its last remaining business, to Ashmore Energy International Ltd. (now AEI).
Vision
Enron's vision is to become the world's leading energy company—creating innovative
and efficient energy solutions for growing economies and a better environment
worldwide.
Values
Respect: We treat others as we would like to be treated ourselves. We do not tolerate
abusive or disrespectful treatment. Ruthlessness, callousness and arrogance don't
belong here.
Integrity: We work with customers and prospects openly, honestly and sincerely. When
we say we will do something, we will do it; when we say we cannot or will not do

5. Case: Enron, Ethics, and Organizational Culture
September2,2014
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something, then we won't do it.
Communication: We have an obligation to communicate. Here, we take the time to talk
with one another…and to listen. We believe that information is meant to move and that
information moves people.
Excellence: We are satisfied with nothing less than the very best in everything we do.
We will continue to raise the bar for everyone. The great fun here will be for all of us to
discover just how good we can really be.
Principles of Human Rights
Enron stands on the foundation of its Vision and Values. Every employee is
educated about the company's Vision and Values and is expected to conduct
business with other employees, partners, contractors, suppliers, vendors and
customers keeping in mind respect, integrity, communication and excellence.
Everything we do evolve from Enron's Vision and Values statements.
At Enron, we treat others as we expect to be treated ourselves. We believe in
respect for the rights of all individuals and are committed to promoting an
environment characterized by dignity and mutual respect for employees,
customers, contractors, suppliers, partners, community members and
representatives of all levels of Government.
We do not and will not tolerate mistreatment or human rights abuses of any
kind by our employees or contractors.
We believe in treating all employees fairly, regardless of gender, race, color,
language, religion, age, ethnic background, political or other opinion, national
origin, or physical limitation.
We are dedicated to conducting business according to all applicable local and
international laws and regulations, including but not limited to, the U.S. Foreign
Corrupt Practices Act, and with the highest professional and ethical standards.
We are committed to operating safely and conducting business worldwide in
compliance with all applicable environmental, health, and safety laws and
regulations and strive to improve the lives of the people in the regions in which
we operate. These laws, regulations, and standards are designed to safeguard
the environment, human health, wildlife, and natural resources. Our
commitment to observe them faithfully is an integral part of our business and of
our values.
We believe that playing an active role in every community in which we operate

6. Case: Enron, Ethics, and Organizational Culture
September2,2014
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fosters a long-term partnership with the people with whom we come into daily
contact. Strengthening the communities where our employees live and work is
a priority. We focus community relations activities on several areas, with
particular emphasis on education, the environment, and promoting healthy
families.
We believe that our employees and the employees of our contractors working
in our facilities are entitled to safe and healthy working conditions.
Case
Enron, Ethics and Organizational Culture
For many people, a company called Enron Corp. still ranks as one of history’s classic
example of ethics run amok. During the 1900s and early 2000s, Enron was in the
business of whole-sale natural gas and electricity. Rather than actually owning the gas
or electric, Enron made its money as the intermediary (wholesaler) between suppliers
and customers. Without getting into all the details, the nature of Enron’s business, and
the fact that Enron didn’t actually own the assets, meant that its accounting procedures
were unusual. For example, the profit statements and balance sheets listing the firm’s
assets and liabilities were unusually difficult to understand.
It turn out that the lack of accounting transparency enabled the company’s managers to
make Enron’s financial performance look much better than it actually was. Outside
experts began questioning Enron’s financial statements in 2001. In fairly short order,
Enron collapsed, and courts convicted several of its top executives of things like
manipulating Enron’s reported assets and profitability. Many investors (including former
Enron employees) lost all or most of their investments in Enron.
It’s probably always easier to understand ethical break-downs like this in retrospect,
rather than to predict they are going to happen. However, in Enron’s case the
breakdown is perhaps more perplexing than usual. As one writer recently said, “Enron
had all the elements usually found in comprehensive ethics and compliance programs:
a code of ethics, a reporting system, as well as a training video on vision and values led
by [the company’s top executives]
Experts subsequently put forth many explanations for how a company that was
apparently so ethical on its face could actually have been making so many bad ethical
decisions without other managers (and the board of directors ) noticing. The
explanations ranged from a “deliberate concealment of information by officers “to more

7. Case: Enron, Ethics, and Organizational Culture
September2,2014
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psychological explanations such as employees not wanting to contradict their bosses)
and the “surprising role of irrationality is decision-making.”
But perhaps the most persuasive explanation of how an apparently ethical company
could go so wrong concerns organizational culture. The reasoning here is that it’s not
the rules but what employees feel they should do that determines ethical behavior. For
example (speaking in general, not specifically about Enron).The executive director of
the Ethics officer Association put it this way:
We’re a legalistic society, and We’ve created a lot of laws. We assume that if you just
knew what those laws meant that you would behave properly. Well, guess what? You
can’t write enough laws to tell us what to do at all times every day of the week in every
part of the world. We’ve got to develop the critical thinking and critical reasoning skills of
our people because must of the ethical issues that we deal with are in the ethical gray
areas. Virtually every regulatory body in the last year has come out with language that
has said in addition to law compliance, businesses are also going to be accountable to
ethics standards and a corporate culture that embraces them.”
How can one tell or measure when a company has an “ethical culture”? Key attributes
of a healthy ethical culture include:
Employees feel a sense of responsibility and accountability for their
actions and for their actions and the actions of others.
Employees freely raise issues and concerns without fear of retaliation.
Managers model the behaviors they demand of others.
Managers communicate the importance of integrity when making difficult
decisions.
Questions
1. Based on what you read in this chapter, summarize in one page or less how you
would explain Enron’s ethical meltdown.
2. It is said that when one securities analyst tried to confront Enron’s CEO about the
firm’s unusual accounting statements, the CEO publicly used vulgar language to
describe the analyst, and that Enron employees subsequently thought doing so
was humorous. If true, what does that say about Enron’s ethical culture?
3. This case and chapter both had something to say about how organizational
culture influences ethical behavior. What role do you think culture played at

8. Case: Enron, Ethics, and Organizational Culture
September2,2014
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Enron? Give five specific examples of things Enron’s CEO could have done to
create a healthy ethical culture.
Question & Answer
Q:-1 Based on what you read in this chapter, summarize in one page or less how
you would explain Enron’s ethical meltdown.
Solution:
Enron Their business of whole selling of natural gas and electricity done by Enron
during the year of 1990s and early 2000s was quite well. The nature of Enron business
was to make money as an intermediary between suppliers and customers, without
getting into all the details. They maintain unusual accounting procedure, which show
that they have no asset of their own. Through they have some financial statement, but
they are unusual and difficult to understand. For this reason the financial performance
looks better than the reality.
In 2001 enquiry was set up by order of the count when Enron was collapsing. As a
result of manipulation of top executive a large number of investors lost their investment
in Enron. From the case study of Enron it can be predicted that ethical break down is
happen.
Enron had morals, reporting system, financial matter and also training video on vision
and values. This looks apparently so ethical on its face but it has no such use. Experts
said that it happened because the lack of communication between the employers and
employees and also for making decisions individually.
The employees do not obey their boss and they do whatever they want. They do not
follow any rules and regulation and they have no organizational ethnicity.
Experts are also concerned that the following key attributes a healthy ethical culture:
1. Employees feel a sense of responsibility and accountability for their actions and
for the actions of others.
2. Employees freely raise issues and concerns without fear of retaliation.
3. Managers model the behaviors they demand of others.
4. Managers communicate the importance of integrity when making difficult
decisions.

9. Case: Enron, Ethics, and Organizational Culture
September2,2014
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So finally it can be said that if Enron had the above things present in them then this
whole ethical melt down would have never happened.
Q:-2 It is said that when one securities analyst tried to confront Enron’s CEO
about the firm’s unusual accounting statements, the CEO publicly used vulgar
language to describe the analyst, and that Enron employees subsequently
thought doing so was humorous. If true, what does that say about Enron’s
ethical culture?
Solution:
If this is true then we must say that it’s a shame for all, the Enron org and its employees.
Because no one is doing what is right and when someone is doing it in the right way he
is not getting the acceptance he deserved which is a total ethical break down for Enron
in a negative way.
Q:-3 This case and chapter both had something to say about how organizational
culture influences ethical behavior. What role do you think culture played at
Enron? Give five specific examples of things Enron’s CEO could have done to
create a healthy ethical culture.
Solution:
Enron followed a very unethical and irresponsible culture throughout the organization
especially in the financial statement and decision making factors, which made them
sufferers in the end. So, the following five things could have made it a healthy ethical
culture for Enron if The CEO could have applied them in the right place at the right time.
They are:
 Maintain accountability for all of them who are working for the Enron.
 Keep every financial statement updated and keep them in a proper way.
 Give all the employees the scope they need to express themselves and their
ideas. Choose the best innovative ideas and give reward for encouragement.

10. Case: Enron, Ethics, and Organizational Culture
September2,2014
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 Take decisions in a communicative way by discussing it with other employees
but not individually.
 Give each employee the respect he/she deserves because it will make them
loyal towards the org.
Findings
 In Enron dishonesty is found
 Enron’s employees have lack of self respect
 The people working in Enron are irresponsible
 Most employees of Enron akin to avoid their duties
 Lack of morality is found in Enron
Recommendation
 Maintain accountability for all of them who are working for the Enron.
 Keep every financial statement updated and keep them in a proper way.
 Give all the employees the scope they need to express themselves and their
ideas. Choose the best innovative ideas and give reward for encouragement.
 Take decisions in a communicative way by discussing it with other employees
but not individually.
 Give each employee the respect he/she deserves because it will make them
loyal towards the organization.

11. Case: Enron, Ethics, and Organizational Culture
September2,2014
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Conclusion
In conclusion, one can see that a variety of perspectives can be applied to the Enron
scandal. Policy perspectives such as punctuated equilibrium and Edelman’s symbolic
politics and constructing of the political spectacle help to frame the issue politically and
symbolically. Viewpoints such as mixed deontology and universal ethical egoism help to
understand how the culture of narcissism at Enron developed from an ethical
framework. Trait and transformational theories help us to make sense of what went
wrong at Enron from a leadership perspective. Historical, economic, and political
conditions aid in making sense of the situational factors contributing to the rise and fall
of Enron. In the end, there is no one answer why Enron became the largest bankruptcy
in the United States history. Perhaps, that is part of the reason why people continue to
find the story so fascinating.