Running Head: THE LYING STOPS HERE

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The Lying Stops Here: A Structural Change for Enron
Southern New Hampshire University
Chelsea Monroe

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Abstract
Deceitful, irresponsible, unethical; these are the adjectives typically associated with the Enron
Corporation. Putting profit and employer needs above that of employees and proper morals sent this company spiraling into trouble (Johnson, C., 2003, p. 45). Despite its innovation and initial success, Enron will forever be known for the ineffective structure and culture developed and enforced by its leaders. This paper looks at the Enron bankruptcy crisis in 2001 from an organizational behavior perspective. The downfall of this once Fortune 500 company unveils the unethical practices of Kenneth Lay, Jeff Skilling, and other corporate leaders, misuse of power by these individuals, poor decision-making, and breakdown of communication within the organization. These concepts are used to answer the questions: What were the traits of Skilling and Lay that led to poor leadership? How did the decision-making processes of the company lead to its downfall? How did the misuse of power lead to communication breakdown? How did unethical practices of the company negatively impact employee motivation? This paper will further describe these issues, suggest solutions, and provide methods for implementation.

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Introduction and Background
A façade of success can only be sustained for so long until the truth is unveiled. This was the case of the Enron crisis in 2001. Enron leaders, Kenneth Lay and Jeff Skilling, along with outside auditor, Arthur Anderson, took a once successful company and drove it into the ground
(Frontain, M., Enron Corporation section, para. 2). The case of Enron shows the importance of ethical leadership, proper use of power, communication, and informed decision making as critical elements of sustained success. Enron exemplifies the need of an organization to create business structures, culture, and values that enforce ethical practice. This established system impacts the behavior of all employees and management within an organization.
Enron Corporation was founded by Kenneth Lay in 1986. Once a top energy suppliers in the United States and headquartered in Houston, TX, Enron shocked the country as it rose to and fell from the top within a short time (Frontain, M., Enron Corporation section, para. 2). Lay, joined by Jeff Skilling in 1991, through an aggressive organizational culture and deregulation of the energy and natural gas industries, was quickly able to expand his company. This was demonstrated as it was named by Fortune Magazine as “America’s most innovative company”
(Ulmer, R., Sellnow, T., & Seeger, M., 2015, p. 127). However, in 2001, the company fell from its former success and was forced to file for bankruptcy. Outside auditor, Arthur Anderson, joined the team, further allowing Enron to temporarily cover its financial catastrophes from the public (Frontain, M., Enron Corporation section, para 6).
Robbins, S.P. and Judge, T.A. (2015) describe organizational behavior as a field of study questioning the influence individuals, organizational structure, and groups have on behavior within organizations, with the higher purpose of applying the study to improve an organization’s effectiveness (p. 10). In the case of Enron, the way the organizational structure and culture was

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developed and accepted created an expectation of employees to conform. Specifically, examining where the company went wrong offers insights for future companies to avoid similar catastrophe. The case of Enron demonstrates the interrelations of organizational behavior concepts such as power, communication, and ethical decision making. Understanding these relationships and creating an appropriate balance is critical to redefining culture.
Where Did Enron Go Wrong?
Enron led itself to its demise through the unethical culture