Enron And The Decision Making Factor
Introduction – Students. analysts and critics of modern concern pattern will ever see the colossal Enron prostration as an of import text book instance about how a batch of different things inside the company can trip a about nightlong ruin of a one time esteemed company. If there was any Cinderella narrative in the universe of bluish bit trading and high portfolio concern. Enron was the ultimate antonym. if non the enchantress herself who was killed by her ain deadly potion.
The Enron prostration resulted in the formulating of many different sentiments indicating to the many different possible grounds why Enron – with all the promise and potency that it has a few old ages before it went south – made the nosedive that made it one of the worst catastrophes in the history of trade. commercialism and concern.
There is no uncertainty that most of the sentiments that surfaced explicating the ground why such an contingency befell Enron placed the incrimination on the incorrect things that the top direction echelon did for the company ; they are after all the one which is responsible for the present and the hereafter of Enron. Critics looking at the Enron fiasco scrutinized what happened taking to the prostration utilizing many different positions and sing many different factors. both in the professional capableness of the company’s leaders every bit good as the impact of the environing factors beyond Enron’s control.
One of the most of import aspects in the argument sing the autumn of Enron is determination doing. Obviously. a batch of incorrect determinations were made. with one every incorrect determination moving as a edifice block that finally became an unsurmountable wall of effects all borne out of incorrect or defective determination devising processes that yielded consequences that did the company more injury than good.
Indeed. the determination devising linchpins important to the constitution of the instance that the Enron prostration was due in some extent to the determination doing facet of the leading strata of the company can be identified easy as it is scattered throughout the timeline of Enron’s really nigh and non so distant yesteryear taking to the eventual autumn of the company that hid behind the frontage of the edifice the ugliness created by the qualities of its leaders that caused the pandemonium that burned down Enron down to meager. worthless ashes.
This paper will pick the important minutes wherein the determination devising capablenesss and abilities of its top direction leaders were at drama and utilize these minutes to set up the ethical and other considerations coming to play during the analysis of the determination doing attempts of the leaders and why the result of such exercisings led to the autumn of Enron and non towards the company’s improvement. which is the chief undertaking of the company’s top executives.
The paper will use these occasions to emphasize its statement sing the function of effectual. ethical and sound determination devising of top executives taking to either the success or bankruptcy of companies. in this instance that of Enron. and discuss cardinal facets of this line of idea. The paper will non criminalize the actions of the executives of Enron ; instead. it will inculcate inputs from other professionals sing of import facets in the treatment of corporate determination devising ( moralss. result-orientation. etc ) .
Background – Various angles have already been explored by many different persons every clip the subject of analysis is Enron and its prostration. Because of this. the paper is traveling to concentrate on an facet that is focused more on Kenneth Lay and the remainder of his top executive clique’s personal feature that could hold played an of import function in the result of Enron’s operation.
Decision devising is both a personal feature as it is a professional certificate. even an plus. Some people are being paid fine-looking sums of money for their ability to transform determination doing minutes into an chance that provides a positive consequence and expected result for the company. Ehringer ( 1995 ) puts it merely: ‘The ability to do good determinations is the specifying quality of our lives’ ( Ehringer. 1995. p. 1 ) .
When Lay. Skilling. Fastow and other Enron foremans were placed in their several places. they were expected to exert a high degree of intuitiveness. concern acumen and professional foresight so that every determination doing chance is met with the company’s best involvement long term and short term in head. They were where they were because those who placed them at that place believed that they can do determinations to which the company can profit from.
When Enron prostration. many people and organisations criticized the questioned the determination doing capablenesss of the top executives – was the prostration an consequence of the consequence of the determination that they made? Was the determination made seting the benefit of the company and the employees foremost. or are the determinations shaped so that it benefited them foremost? How bad was the breach in the ethical considerations that a professional should take every clip he or she makes a determination that puts the hereafter of the company on the line?
These are merely some of the inquiries that may besides be present in the heads of those who followed the Enron instance. Certain there were changing grades of misrepresentation and deceitful Acts of the Apostless from the portion of many choice persons who sinned against Enron and its employees. but these instances would hold been minimized or even averted wholly if the of import determination devising privileges was limited to a choice few. or if the future-altering determination devising capableness is disseminated mostly among a immense group of people that can supply a cheque and balance system for Enron.
Roberts ( 2004 ) explained that ‘ if it is possible for others to do the determinations for a unit. so new options arise to plan the decision-making procedure every bit good as the inducement strategies to acquire better public presentation on both dimensions. For illustration. the design might stipulate that a determination about a undertaking originating in one unit that affects another would be implemented if and merely if both units agree to it. ” ( Roberts. 2004. p. 51 ) . Enron is an energy trading house which was executing good in the early portion of its being. By the start of the twenty-first century. the jobs that the foremans were seeking to conceal from the populace and from the employees started to stank. Soon. events unfolded like dominoes falling one after the other as a effect of information sloping out into the public’s attending.
Before 2004. the populace already had a clear thought about how Enron foremans were purportedly the 1 responsible for the defrauding of the employees and their company portions and other benefits. every bit good as the one responsible for the bankruptcy of Enron. One by one. cardinal company functionaries stepped out of the visible radiation and implicated a new name. which will in bend implicate a much bigger name. until the dragnet sent out to see who was accountable for the deceitful Acts of the Apostless in Enron caught its top foremans. including Lay. Skilling and Fastow.
Many persons faced condemnable charges. and many more merely went place non merely idle but are robbed of life-time investings which Enron foremans manipulated and shortly lost because of the incorrect determinations they made on how to run the company and do it prosper and turn. Examples of how Enron direction made incorrect determinations during determination doing minutes abound in the history of the company. Take for illustration what happened in 1987 – alternatively of declaring the $ 190 million loss the company experienced. they concealed it alternatively. taking to condemnable charges.
This wont of Enron for choosing to hide losingss alternatively of declaring it became a unsafe frailty ; when Fastow was on board Enron. the same mentality affected the determination devising of Enron. taking to increase in heap of instances wherein Enron through its top direction consciously made actions that defraud the employees and the populace. There was besides the instance of hapless public dealingss by Enron which fanned the fires of terror that removed any possible chance for Enron to rectify the fiscal state of affairs without making craze that saw many shareholders selling their stocks due to the continued falling of the stock value of Enron.
Statement of Problem – The most of import determination that Enron’s executives faced was non the determination on whether or non to publically denote about the bankruptcy ; in fact. there was no determination doing factor during that case since the quandary of the company has already been decided irrespective of what the top executives might hold opted for: they were level out broke and the public needs to cognize about this. that was the state of affairs.
The true determination devising minute for Enron’s foremans was the clip when they were make up one’s minding what the best option to take is with respects to the fiscal facet of the company. including revenue enhancements. net incomes and fiscal loses. It was a affair of confronting a determination doing undertaking that provided the Enron foremans with two options – to make the right thing. or to choose for something that is morally and ethically inappropriate.
The determination reached in this peculiar determination doing case was laced with the hope that the option they took would be free from serious reverberations and give them adequate clip to repair it all up once more. Unfortunately for Enron. things did non work out as planned. and the condemnable liability of the Enron foremans stemmed from the fact that they decided to make something which they consciously knew was damaging to the public assistance of the Enron company and its employees.
During that peculiar case. Lay could hold opted to make the right thing and faced the effects – by coming clean. he may hold a more sympathetic populace to back up him in whatever attempts he may wish to set about to resuscitate Enron. and non be faced with the fall ining stock value since those who can sell theirs sell it in a frenetic stage to free themselves of the stock of the company which is approaching at hand bankruptcy. This showed how the people do non give 2nd opportunities to those who squander their determination devising privileges by doing determinations bereft of the consideration of the good of the greater many.
Decision doing – John Hintze ( 2006 ) . in his treatment about doing smart determinations during determination devising. used the instance of the Enron prostration to open his treatment and set up the fact that jobs are something that is foreseen. something that happened however owing to bad determination devising. Hintze wrote. ‘should we have seen 9/11 coming? What about the Enron prostration? The Signs were at that place ; people pointed them out. but the appropriate stairss were non taken by those in a place to make something.
Why is this? Politicss? Greed? Those surely contributed. but there was something else at work here. excessively: A failure of common sense in determination making’ ( Hintze. 2006. p. 123 ) . Enron: Bad determination doing – Nothing can turn out more about how bad the determination doing went inside Enron cantonment more convincingly than the fact the company transformed from comfortable to hapless nightlong. This was the general feature of Enron through the traits shown by its leaders that reflect the Enron personality.
There were earlier treatments in the paper about snippings on cases indicating to Enron’s preference for doing bad determination or for traveling to the resolution of a job using an option that is more questionable. Fox ( 2004 ) explained that ‘Enron believed that its enlargement into international undertakings were positive enterprises merely because they put the company in more possible markets. In truth. Enron made bad concern determinations that weren’t supported by the deal’s economic sciences.
The bad concern determinations piled up. stretching from India to Brazil. coercing the company to make something about its finances’ ( Fox. 2004. p. 307 ) . At least at this point. Fox is non indicating at the unethical facet of the Enron determination doing machinery. merely the fact that they made determinations that were bad for the hereafter of the company. but non to the extent of intentionally undermining the company or seting the company in danger with all known hazard for personal addition. For Fox. it was a bad call field and simple.
But the affair of the fact is that non everyone sees it the manner Fox does. and there are those who believe that there were ethical breaches in the determination devising in Enron among its top foremans. The ( absence of ) Leaderships in decision-making – Decision devising in retrospective is one of the common line of thought used when look intoing events that led to growing or fiasco. It is because determination doing played an of import portion in determining the hereafter of the company ; it is here where the foundation. or deficiency of it. was created via the determinations the foremans made or failed to do.
To follow the jobs or grade important actions ensuing from determination doing which finally resulted to either the success or failure of the company. it is non merely the determination doing events that are looked back to ; the individuals that made them were besides put under the microscope. and among the qualities scrutinized is their determination devising ability and their other features that affect their determination doing attitude and behaviour.
Professionals debate about the thought of a good determination. a bad determination. good purposes and bad purposes and how the good and bad consequence that comes into drama afterwards account for the overall answerability of a individual exerting the power to do determinations that will hold a enormous impact on the hereafter of the company. something which happened in Enron via Lay. Skilling. Fastow and the remainder of the top figures of the company.
Acuff ( 2004 ) explains that ‘if they make a determination that might non hold been the determination I would hold made. and they come and speak to me about it. we look at it and discourse it. There are a batch of different ways to clamber the Equus caballus. I don’t travel stating my thought is the lone 1 that will acquire you where you want to travel. I hold people accountable for good decision-making. If a bad result consequences from a bad determination – that’s a job. But if a bad result consequences from a sensible determination. so that’s concern. and it could go on to anyone” ( Acuff. 2004. p. 87 ) . This was the quandary of those who are seeking to measure the determination doing actions of Enron top executives – did they do determinations. even bad determinations – with the interest of the company in head. and gambled with their callings because they know that if their programs and actions go good. it is highly good for the company. in a really Machiavellian attack towards acquiring things done irrespective of the agencies by which they did it. or were they merely plain guilty of deceitful actions?
Peoples who are burdened by the determination that impacts a batch of people is non ever conformable to taking the high and moral evidences. that is why the proverb about the terminal warranting the means. about acquiring things done at what of all time cost. about presenting against the odds became popular because of people like the Enron foremans who ( likely ) acted upon their determination doing responsibilities by put on the lining what can be a popularly bad determination.
Indeed. it may be easy or even convenient for most people adversely affected by the Enron prostration to impute the colossal corporate fiasco to the top direction figures of the company by knocking their determinations every bit good as their module for sound determination devising. While it is true that Enron’s top executives are responsible for the prostration of the company. it is non that easy to mensurate the degree of ethical determination doing properties of Enron’s top brass.
Goethals et Al ( 2004 ) pointed out that “the complexness associated with ethical determination devising and behaviour. particularly as it applies to leading and the workplace. makes the concept highly hard to research” . adding that “Measuring an individual’s degree of ethical determination devising is disputing. peculiarly because the measuring instruments that are available have jobs with priming and social-desirability effects ; that is. questionnaires or other similar manners of informations aggregation cue respondents to give replies that they believe are socially acceptable instead than replies that truly reflect their ain actions or sentiments ( Goethals et. Al. . 2004. p. 461 ) . ” Proof of which is the fact that all of these executives in inquiry are career corporate leaders even before they joined Enron ; their certificates played an of import function sing their choice for a corporate place every bit high as theirs.
Because of this. every bit good as the factors that affect the credibleness of the ability for designation of the existent public pulsation sing the individuals involved in the issue. ethical determination devising degrees of the individuals involved is difficult to determine. doing claims for questionable ethical determination doing consideration of the people lose of import land and base on deficient set of stable legs for cogent evidence and justification. Still. there are those who believe that the degree of moralss that influences the determination doing capablenesss of the Enron foremans are without a uncertainty questionable. and this includes Mimi Swartz and Sherron Watkins who was quoted in the book edited by Kathy Fitzpatrick and Carolyn B. Bronstein.
In the article. it mentions about how Swartz and Watkins “blame Ken Lay. former CEO of Enron. and other company executives for favoring greed and haughtiness over ethical concern decisions” ( Fitzpatrick and Bronstein. 2006. p. 79 ) . the effect of the published work co-authored by the two persons. Nalebuff and Ayres ( 2006 ) wrote that ‘the job frequently arises because people ignore the costs and benefits that their determinations have on other people. We call this attack “Why don’t you experience my hurting? ” The more proficient term for these effects is outwardnesss. Decision shapers who ignore outwardnesss are bound to do bad decisions” ( Nalebuff and Ayres. 2006. p. 67 ) . This account greatly tarnishes the ethical value of the determination doing moralss of Enron foremans because it shows that they are prone or inclined to do determinations even if the consequence of such determinations lead to negative effects that other people will see.
Niskanen ( 2005 ) believes that Lay. one of the top foremans of Enron. “should be judged on the footing of his personal actions. waies to subsidiaries. or the actions of subsidiaries that he implicitly condoned by cognizing about it without trying to rectify – non on the footing of what he should hold known” ( Niskanen. 2005. p. 6 ) . Lay’s condoning of actions is a consequence of a personal and professional determination that he made – or failed to do – and because of that. Niskanen believes that Lay is answerable for any condemnable charges that would ensue from that peculiar action ( or inactivity ) . Watkins was believing of the company and its employees and their hereafter and hers every bit good. when she made the determination to allow her higher-ups. peculiarly Lay. cognize about the possible accounting jobs and the doing populace of the current and existent fiscal and trade position of the company. This clearly illustrates the difference in moralss when it comes to determination devising.
Decision devising. moralss and public perceptual experience – Decision doing in concern is non simply a power or a privilege that one can utilize at will without thought of the effects that might go on should the determination resulted into something that is considered as adversely negative and damaging to the public assistance of the employees. their occupations and the company they work for. Those who are provided with such agreeableness to travel along with their occupation description should see that it is besides their duty to do certain that their employees and subsidiaries do non believe that they are wasting away their determination devising privilege and everything that goes along with it. This was the prevalent attitude or mentality of the Enron employees particularly approaching the at hand prostration of the company. The absence of ethical consideration resulted to the losing of the credibleness of the foremans of Enron because they were non careful with how they undertake their determination devising undertakings.
While bankruptcy is something that is really hard to accept and impacts greatly in the lives of the employees particularly the rank and file bluish collar workers. there is a sense of adding abuse to injury during occasions wherein the employees are get downing to recognize that all of the unfortunate things that happen in the company and in their callings are all a consequence of the faulty. incompetent and unethical determination devising of the top direction echelon and non because the company was helpless in the onslaught of a annihilating economic job. like how companies closed down during the Great Depression despite the attempts of American business communities to maintain the different industries alive and external respiration.
During the prostration of Enron. the US is sing a really stable economic system far from that which characterized US economic system during the Great Depression. and is shielded firmly from the impact of whatever it was that was go oning in the planetary economic and concern landscape. and so during the Enron prostration. the corporate finger was indicating an impeaching index figure to Enron foremans and bulk of the cause of their outrage originates from the sloppy determination doing capablenesss of Enron foremans who lost their credibleness the minute they lost Enron. Brazelton and Ammons ( 2002 ) wrote in the book they co-wrote: “The Ethical motives Resource Center conducted a study in 2000 in which it learned that 43 per centum of respondents believed that their supervisors are by and large hapless illustrations of honest directors. and the same figure were pressured to compromise their ain unity or that of their organisation during determination devising.
The study besides identified a strong connexion between employees’ perceptual experiences of their supervisors and their ain ethical behaviour ( Brazelton and Ammons. 2002. p. 388 ) . ” Enron determination devising: the two-pronged factors – It can be pointed out that one of the jobs that happened to Enron is the ineffective of determination devising among top executives – foremost. their top executives failed to do right determinations when they are required to make so. and 2nd. Enron was non to the full complimented with a set of professionals which could hold contributed to the determination devising procedure. and in the procedure provided the possibility of inculcating new or different thoughts that could hold altered the result of the determination devising procedure.
Fitzpatrick and Bronstein ( 2006 ) did non look entirely on Enron’s foremans and the determinations they made in the direction of Enron and the company’s money and plus. instead. the two editors focused on the absence of a cardinal top direction forces and took the presence of such a nothingness as a mark that Enron is non even prioritising the public assistance of the company and its employees. The book Ethical motives in Public Relations: Responsible Advocacy. which includes the Enron instance as one of the of import instance surveies to indicate out the importance of the function of public dealingss. explains that “perhaps the administration of these companies was such that they did non care about their populaces. and did non desire the advice of senior-level public dealingss officer playing an active or dominant function in organisational determination making” ( Fitzpatrick and Bronstein. 2006. pg 179 ) .
Conclusion – Niskanen ( 2005 ) summed up the Enron instance on its feature of booming in bad determinations made by its corporate leaders by stating in the book that ‘the most of import lesson from the Enron prostration. nevertheless. is that Enron failed because of a combination of bad concern determinations. non because its histories were misleading’ adding that ‘the major concern determinations that most contributed to its prostration were a series of bad investings. most of which were in the traditional asset-rich industries ; the failure to accommodate two rather different concern theoretical accounts ; and the determination to concentrate direction aims on reported grosss and gaining instead than on the present value of future hard currency flows’ ( Niskanen. 2005. p. 6 ) .
Are they hapless in determination devising. or was the determination doing adversely affected by other concerns and precedences outside of Enron that the consequences of the determination made for Enron looks like those who made the call did non even think about how this class of action will impact Enron? There are no sufficient cogent evidence to indicate that the instance was the latter ; for a company that became 7th all in all in the Fortune 500 at least one time. it is unthinkable how there will be witting attempts to drop the company by doing incorrect determinations. intentionally or non.
The point of the paper is non the averment of the club of Skilling. Lay or even Fastow. it’s the establishing of the point that determination devising. when non handled decently. can turn even the most profitable company into a nose-diving wreck in a short period of clip. that determination devising plays an of import function in how a individual defines his or her life and how he or she leads a company and that because of these factors. no 1 should hold an alibi why determination devising was taken lightly and without much idea or attention. All the people can see is a group of people who made incorrect determinations several times. the ensuing web and how they got trapped in that web. that is presuming that there was no maliciousness or concealed docket that the foremans perpetrated in stead of Enron’s prostration.
In the terminal. merely Lay ( now deceased ) and the elect circle of the Enron executive coterie will be the 1s who would truly cognize about the truth sing moralss and the determination devising in Enron taking to the prostration of the company. Many would inquire. and some would assume. the grounds every bit good as the degree of guilt of these leaders when it comes to transgressing the ethical demands needed when set abouting determination devising for a company. Regardless. the determinations they made created far making ripplings and altered the lives of many persons who invested non merely their clip. strength and life’s nest eggs into the company but every bit good as their but every bit good as their religion and trust. which are non in tattered pieces because of the bad determinations that Enron executives made.
Crawford ( 2006 ) farther elaborated on the pointed by explicating that ‘bad determinations by a major company. nevertheless. cause major breaks for all of the company’s stakeholders’ . He pointed at the instance of Enron as one of his illustrations. stating that ‘the Enron catastrophe. as one illustration. surely had lay waste toing impacts on the lives of most of Enron employees ( including the center directors and professionals who invested in the company-sponsored Enron 401 [ K ] plans ) and besides caused enduring for many single investors who purchased Enron stock on the unfastened market. Thousands of other Enron stakeholders. including Enron’s providers and clients. besides suffered. ’ ( Crawford. 2006. p. 26 ) . Indeed. Enron’s determination devising had a manus in how the company turned out to be.