Enron Scandal: Financial Fraud and Organizational Behavior

Significance of the Research

While the past cannot be changed and Enron’s failure cannot be helped any longer, an analysis of the problem in question and the definition of new tools for managing it may help other organizations, which face similar dilemmas in the competitive environment of the 21st century global economy.

Methods of Data Collection

The data will be collected with the help of a general research (i.e., the analysis of the existing reports, researches and case studies on the case of Enron, as well as the studies devoted to the areas that Enron should have addressed (OB, corporate social responsibility (CSR), corporate ethics, etc.)).

Analysis of Data

The data will be analyzed with the help of a matrix analysis. The specified approach will shed some light on the correlation between the factors that predetermined Enron’s failure.

Benchmarks

The process of data gathering will presumably take around two weeks. Information analysis and its further interpretation together with the development of the required matrixes will require three weeks. Finally, conclusions will be drawn and further recommendations will be provided.

Introduction

Widely considered the most infamous scandal of the century, the case of Enron can be viewed as not only a prime example of corruption in business, but also an important lesson for a range of other modern companies in terms of significance of corporate ethics and organizational behavior.

Some might consider Enron a prime example of incorrigible corruption within an entrepreneurship; however, a closer look at the case in point will reveal that the problem, in fact, could have been handled once the panic following the company’s lack of success had been addressed from the perspective of corporate ethics and a proper code of organizational behavior.

A brief overview of Enron’s scandal will show that the company attempted at returning into the industry and reclaiming its position as the top leader in the global market.

However, because of a range of wrong choices made in terms of investment, the company started facing financial challenges. In order to retain its investors, Enron’s managers falsified the outcomes of audits and made the organization look prosperous. Once the commercial bubble burst, the key shareholders were ripped of their legitimate financial reward (Albrecht, Albrecht, Albrecht & Zimbelman, 2008).

Problem Identification

It is assumed that Enron’s key problem concerned not the production related issues, but the corporate ethics – or, to be more exact, the lack thereof. Indeed, with so many people to support the concept of a financial fraud, the organization must have had much more basic flaws in its design rather than a miscalculation in its HRM policy.

The willingness of the company members to resort to a financial fraud in order to cover the likely downfall and retain the money that people invested into it shows that the company lacked not only a set of rigid moral principles, but also the efficient leadership approach, which would have instilled the above-mentioned principles into the organization’s framework.

Additionally, an alternative leadership approach could have contributed to a more detailed analysis of the situation and the identification of possible avenues, such as the development of a new brand product, for addressing the complicated financial situation. Particularly, these are rigid ethical principles, the corporate social responsibility (CSR) concept, a different leadership approach and a more adequate strategy for costs allocation that would have saved Enron from crisis and the resulting scandal.

Central OB Issue

As it has been stressed above, the lack of corporate social responsibility (CSR) among the staff and the company members was the key factor that led the organization into a dead end. Therefore, it is assumed that the incorporation of the principles of corporate social responsibility into the company’s framework would have helped solve the issue by promoting a more sensible approach towards costs allocation and the company’s financial strategy.

Sustainability

One must admit, though, that the complete absence of CSR, which could be observed in Enron, was not the only factor that determined the failure of the organization in the global market. As it has been stressed above, the lack of a cohesive leadership approach and a determined leader, who would have promoted the corresponding model for OB, should also be listed among the key problems within the organization.

A brief overview of the leadership strategy adopted in the com