Applied Case 14-17

14-17. This case and chapter 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 Enrons CEO could have done to create a healthy ethical culture.

Application Case Enron, Ethics, and Organizational Culture It turned out that the lack of accounting transparency enabled the Written and copyrighted by Gary Dessler, PhD._ better than it actually was. Outside experts began questioning Enron's For many people, a company called Enron Corp. still ranks as one financial statements in 2001. In fairly short order, Enron collapsed, of history's classic examples of ethics run amok. During the 1990 s and courts convicted several of its top executives of things like and early 2000s, Enron was in the business of wholesaling natu- manipulating Enron's reported assets and profitability. Many investors ral gas and electricity. Enron made its money as the intermediary (including former Enron employees) lost all or most of their investments (wholesaler) between suppliers and customers. Without getting into in Enron. In Enron's case, this breakdown is perhaps more perplexing all the details, the nature of Enron's business-and the fact that Enron than usual. As one writer said, didn't actually own the assets-meant that its profit statements and Enron had all the elements usually found in comprehenbalance sheets listing the firm's assets and liabilities were unusually sive ethics and compliance programs; a code of ethics, a difficult to understand. CHAPTER 14 - BUILDING POSITIVE EMPLOYEE RELATIONS reporting system, as well as a training video on vision and enough laws to tell us what to do at all times every day of values led by [the company's top executives]. 154 the week in every part of the world. We've got to develop Experts subsequently put forth many explanations for how a com-_ the critical thinking and critical reasoning skills of our people pany that was apparently so ethical outwardly could actually have because most of the ethical issues that we deal with are in been making so many bad ethical decisions without other managers the ethical gray areas. (and the board of directors) noticing. The explanations ranged from a "deliberate concealment of information by officers," to more psycho- Questions logical explanations (such as employees not wanting to contradict their 14-15. Based on what you read in this chapter, summarize in one bosses) and the "surprising role of irrationality in decision-making." 155 But perhaps the most persuasive explanation of how an apparently 14-16. page or less how you would explain Enron's ethical meltdown ethical company could go so wrong concerns organizational culture. CEO about the firm's unusual accounting statements, the CEO The reasoning here is that it's not the rules but what employees feel publicly used vulgar language to describe the analyst, and that they should do that determines ethical behavior. For example (speaking Enron employees subsequently thought doing so was humorin general, not specifically about Enron), the executive director of the ous. If true, what does that say about Enron's ethical culture? Ethics Officer Association put it this way: 14-17. This case and chapter had something to say about how organizational culture influences ethical behavior. What We're a legalistic society, and we've created a lot of laws. We role do you think culture played at Enron? Give five specific assume that if you just knew what those laws meant that you examples of things Enron's CEO could have done to create a would behave properly. Well, guess what? You can't write healthy ethical culture