The Organizational Decisions of Enron Company (Case Study Sample)

600-7-2 Short Paper: Too Big to Fail?
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600-7-2 Short Paper: Too Big to Fail?
Ethics is a prominent concept in organizational management. In simple terms, it entails a system of moral principles or standards of right and wrong that prescribes how organizations conduct themselves. In that regard, it is deducible that ethical framework has a critical bearing on organizational decision making and, to that extent, defines effective leadership. As explained by Jensen (2013), ethical decision-making cultivates the trust needed to motivate followers towards accomplishing the set goals and objectives. This paper shall examine the importance of ethical framework in organizational management through the case analysis of Enron, a Huston-based energy company that was brought down thanks to certain unethical organizational decision making.
Enron Company made organizational decisions that fall short of what could be said to be ethical. It committed accounting fraud by falsifying the company’s revenues ostensibly to mislead investors, improperly constructed compensation structures that favoured unprofitable behaviour and, created complex financial dependencies that required progressively bigger risks in a constant push to raise stock prices (William, 2002). These improprieties, in effect, translated to bad decisions that saw the juggernaut in the energy sector file for bankruptcy before its eventual death. In other words, the decisions, as expressed there-above, were cumulatively a function of the improper decision-making process of the leadership. In business, a decision-making process entails certain steps taken to determine the best option or course of action that tends towards meeting the organizational needs.
These steps, as provided by Jensen (2013), include defining an issue at hand, identifying the solution and alternatives, assessing the solutions and alternatives, considering and implementing the decisions, and evaluating or, more comprehensively, looking back over everything in the decision-making process. The unethical organization decision-making at Enron shall be accentuated in this paper through its accounting practices through which it acquired negative popularity. Fundamentally, the skewed accounting tactics enabled the company to book more revenue than they actually earned through certain ways. First, as given by William (2002), the accounting practises entailed mark-to-market accounting that allowed the total value of a deal expressively, conveniently overlooking the desired spacing. Secondly, the complicated special purpose entity (SPE) deal enabled Enron to secure loans while hiding or misrepresenting such on the balance sheet.