Lesson 6: Ethical Leadership

Leadership is a basic requirement for developing an ethical corporate culture and reinforcing ethical decision making among employees. While it is important to have a CEO and board of directors committed to ethical decision making, it is equally important all employees understand their roles in becoming ethical leaders. There are many examples of ethical leadership failures, resulting in ethical and legal crises that damage firms.

Reference: FERRELL, FRAEDRICH, AND FERRELL (2013). BUSINESS ETHICS (10th ed.). Stamford, CT: Cengage Learning.

Read the Case Study entitled “Enron – Not Accounting for the Future” on page 574 of the text and the following articles:

Please answer the following questions:

1. How did the corporate culture of Enron contribute to its bankruptcy?

2. Did Enron’s bankers, auditors, and attorneys contribute to Enron’s demise? If so, how?

3. What role did the company’s chief financial officer play in creating the problems that led to Enron’s financial problems?

SAMPLE SOLUTION

Analysts have described Enron’s organizational culture as aggressive and arrogant. People once considered Enron the world’s leading organization but the executives’ arrogance lead them to believe that the company had no genuine competition. Before its dissolution, and after it was apparent that the company was going into ruin, the company still thrived on big-spending (Banerjee, 2002). A New York article reported that Enron believed it had to conduct its operations flashier and better than other rivals did. The company unveiled novel business ventures yearly with lavish gestures. Besides arrogance, other factors contributed to its demise. Needless spending and the lack of internal risk controls were the primary mistakes of the company (Banerjee, 2002). Enron’s managers pushed integrity aside while rewarding innovation and punishing weak or underperforming employees (Ferrell, 2017, p.496). The company encourages a culture of rivalry and cutthroat competition within the…