Corporate Governance and Enron Term Paper

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ENRON & ETHICS

To say that the behavior and outlook at Enron was myopic would be putting it lightly. Indeed, to be myopic means to be short-sighted and intellectual about decisions made and the effects that will be rendered. Besides that, it is terrible leadership and only sets up a firm to fail. That is precisely what happened at Enron given that decision after decision was made that was immoral on its face and/or just did not keep the long-term effects in mind. In the end, this led to the complete evisceration and obliteration of the firm and it left many people penniless. Even so, the lessons that should be learned from Enron and what happened to that firm are many and they are lessons that should not be ignored or disregarded. Even if leaders have to go so far as to rattle through checklists and double-checks, missing important things relating to governance and company culture just cannot be missed when there are millions and billions of dollars and the livelihoods of so many people at stake, not to mention affected external stakeholders like customers and community members.

Enron & Ethics

The overall depth, breadth and sheer magnitude of things that went terribly wrong at Enron are voluminous. Some of it was unwitting and unknown but a lot of it has been revealed as premediated and criminal in nature. Myopic thinking, the lack of proper leadership and the improper influencing of people with a toxic company culture were all in play with Enron. This report will address that myopic thinking, the lessons to be learned, the proper role of corporate governance, how all of this dovetails with the twenty-one laws as put forth by Maxwell and a good checklist to follow when it comes to ethical leadership. While there was clearly some horrible people at the helm at Enron, it could have (and should have) been identified and stopped a lot sooner than it was and before so many people lost everything or close to it (CEMI, 2010).

Myopic Thinking

As indicated in the abstract, to be myopic means to be short-sighted and devoid of thinking of the long-term effects of one's decisions or indecisions. When it comes to Enron, they were clearly engaging in myopic actions, both legal and illegal, so as to provide short-term fixes rather than considering the long-term picture. One of the more nefarious examples was their use of shell companies and moving money around to conceal losses. Just like any other Ponzi scheme or something similar, there is always a point where those sorts of tactics end terribly. It is similar to a person that gets a payday loan. While the short-term money needs might be met, the money has to be paid back and with significant interest. In other words, short-term gains and results are not irrelevant but short-term gains can actually hurt a person or firm in the long run if those decisions are made excessively and/or over time (Singletary, 2014). Sometimes, it is normal and expected for hard decisions to be made. However, making those decisions does not have to be myopic in nature. What Enron was going, overall, was manipulating the market and trying to hide the fact that their tactics were absolutely not working out for them. As a result, it ended up destroying the company and Arthur Andresen as well since they were in on the fraud and deceit to some degree.

Maxwell's 21 Laws & Enron

What follows in this section and the next are lists of the relevant subjects and their facets. First up is Maxwell's list of laws that relate to leadership. There are twenty-one in total and they are referred to, with all sincerity, as "irrefutable" in nature. For each one, what the law means and how they can be applied to Enron, for better or worse, will be explained (Maxwell, 1998). They are as follows:

The Law of the Lid

The thing to know about this law is that the leadership has a "ceiling" that is created by the abilities and foresight of its leaders. In other words, a business will not exceed the capabilities and foresight of the people in charge. If the people in charge are myopic or they are otherwise making ill-informed or bad decisions, the whole organization will be limited as a result. Certainly, Enron and its people were limited (and done in) due to the lack of capabilities and failure to act properly by the executives in charge (Maxwell, 1998; Thomas, 2002).

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The Law of Influence

Another thing to keep in mind when it comes to leadership is that it is all about influence. Whether good or bad, every single thing a leader does is about influence. Regardless, the person being influenced may or may not be influenced or changed by what the leader tells them to do or otherwise impresses upon them. In the case of Enron, what was being stated was one thing and influenced people in one way, correspondingly. On the other side of that coin is the bad things that the Enron leaders did and what some of the people in the organization did in response to the same. To be sure, there were traders and other people within Enron that were being influenced in a terrible way and they subsequently engaged in terrible actions in response and reaction to this. Regardless, the key thing to remember about leadership is that a leader is not a leader without people that follow them. Just because a leader says to do something does not mean it will get done and it does not mean that the leader will be followed (Maxwell, 1998; Thomas, 2002).

The Law of Process

The scintilla of knowledge to glean from this rule about Maxwell is that leadership is not something that just "comes" to a person, good or bad. Leadership is a set of facets that evolve and change over time. These facets include ethics, emotional strength, vision, timing, momentum and so forth. A leader, if doing their job, is someone who is learning non-stop because there is always something new to know or something that is changing. As such, there will never be a point where a leader can say he or she is "learning." That will never happen from a perspective of practicality as well as from reality. Enron's leaders were developing and learning. However, so many of them were going in the wrong direction and it happened long enough and to enough of a degree that it caused the firm to be eviscerated (Maxwell, 1998; Thomas, 2002).

The Law of Navigation

What is needed to be known about this law is that the leaders and people in charge need to know how to lead and steer the proverbial ship. This dovetails neatly with the discussion of myopia and shortsightedness. If a leader either has no clue what the long-term destination happens to be or they know the right path but take a different one, then they are not being a good leader. It is debatable whether Skilling, Law and Fastow knew what they were doing but it is clear that they made the wrong choice, regardless of whether they knew the right course or not. No company can progress and grow in a way that is healthy and organic when deception and bilking customers is in any way the foundation of what is being done and why. This was not true of all of Enron's people and managers but it was true of the people that mattered, those being the three executives just mentioned. While Enron existed on a very large scale and crashed in such a way on top of that, this holds true of any business, no matter the size and structure therein or thereof (Maxwell, 1998; Thomas, 2002).

The Law of E.F. Hutton

E.F. Hutton was a man that used to be the most prominent stock market analyst in the country (Kadlec, 2015). He was a man that made people take notice, stop and listen to whenever he had something to say. A somewhat controversial yet true expression in the eyes of many is that a woman having to say she is a "lady" is a little unseemly because it should already be clearly obvious whether that is true or not just based on the way the woman acts and carries herself. In other words, what is being said may or may not dovetail with reality and it will become clear right away, or at least eventually, whether there is substance to what is being espoused and said or not. In the end, Enron was saying that everything was fine...and it was not. Even worse, the top executives at Enron knew that with full clarity and said it anyway. Even with that, it became clear that Enron was a proverbial house of cards and it all came crashing down. Talking up good results and celebrating good progress is all well and good. Lying to people.....

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