1. One bad decision was made by Enron CFO Andrew Fastow. In an attempt to boost performance, Fastow created Special Purpose Entities (SPE) underneath Enron. The idea was for the SPEs to secure funds (generally via bank loans) and transfer these funds to Enron. The transfer would generally include an overvalued asset or service. Enron used the SPEs to hide debt and therefore making their financial statements look better. Fastow felt the pressure to meet financial expectations, but that doesn 't justify his actions. What Fastow did was illogical. How could you create hundreds of SPEs to illegally hide debt and get away with it?
Another mistake was how Enron executives managed the corporate culture. Enron 's culture of arrogance led employees to take on greater risk without weighing the consequences. This cockiness is part of the reason for Enron 's downfall. Enron promoted employees that thought they were invincible and fired ones who were conservative. Given his position at Enron, you could place most of the blame on Ken Lay (CEO and Chairman), but I would encourage you to take a look at Jeff Skilling. Skilling implemented a company-wide performance evaluation program that, via peer evaluation, ranked all Enron employees on a scale. Skilling would compile this information and fire the bottom 20%. This process …show more content…
Enron’s code of ethics was window dressing. They knew they had to issue a code of ethics, so they drew up the most standard policy possible. The problem with Enron was that they didn’t do anything else with this policy after they issued it. As Trevino and Brown say in their article, Managing to be Ethical, “creating a formal program, by itself, does not guarantee effective ethics management.” In order for employees to view a code of ethics as more than words on a page, management has to create an organizational culture that respects this policy. It is imperative for corporations to use their code of ethics during day-to-day organizational
Another mistake was how Enron executives managed the corporate culture. Enron 's culture of arrogance led employees to take on greater risk without weighing the consequences. This cockiness is part of the reason for Enron 's downfall. Enron promoted employees that thought they were invincible and fired ones who were conservative. Given his position at Enron, you could place most of the blame on Ken Lay (CEO and Chairman), but I would encourage you to take a look at Jeff Skilling. Skilling implemented a company-wide performance evaluation program that, via peer evaluation, ranked all Enron employees on a scale. Skilling would compile this information and fire the bottom 20%. This process …show more content…
Enron’s code of ethics was window dressing. They knew they had to issue a code of ethics, so they drew up the most standard policy possible. The problem with Enron was that they didn’t do anything else with this policy after they issued it. As Trevino and Brown say in their article, Managing to be Ethical, “creating a formal program, by itself, does not guarantee effective ethics management.” In order for employees to view a code of ethics as more than words on a page, management has to create an organizational culture that respects this policy. It is imperative for corporations to use their code of ethics during day-to-day organizational