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Enron Scandal: Inauthentic Leadership
One of the biggest American companies, Enron, fell bankrupt due to a major accounting scheme resulting in the loss of revenue, employee 401(k) plans, and loss of funds from the shareholders (Semple, 2002). Enron was a popular energy company that did business with many other companies needing their expertise and information. At the peak of Enron’s success, their shares were worth $90.75 before the fall of the company in December of 2001. Enron was considered one of the most popular, powerful, and largest business in the United States. The corporation had extreme influence in Wall Street along with thousands of employees that belonged to the company.
The cause of Enron’s collapse in 2001 was a result of deliberate deception in accounting reporting and recording. The corporation was reporting false revenue and not following appropriate recording procedures for such revenue gains. Basically, the company was “cooking the books” and passing them by inspectors and regulators responsible for validating holdings and accounting statements. This scandal involved high level authority along with cooperation from various shareholders within the company.
Having a pretty good understanding of the Enron scandal and the basic details, I was already prepared to see the negative aftermath of the decisions made by the company CEOs. I assumed that these news articles would highlight the positive data from the company before its inevitable downfall. I also assumed the negative aftermath of the scandal would be presented in a fashion not favorable to the company, but rather being beneficial to the media outlet.
The article by Segal (2019) titled “Enron Scandal: The Fall of a Wall Street Darling” exposes the reader to how and why this mega corporation was the leading company in the industry and how it crumbled to ruins practically overnight. One interesting remark this article made was how the corporation was able to pass fabricated accounting reports and statements by regulators and auditors. I believe this constitutes as a form of media bias as they selected this event to cover because of the high notoriety.
The way in which they reported and covered this event revealed their own bias and view. By doing so, this article is aimed at influencing the public opinion of the Enron Scandal. The point of view from this article appears to be a single point of view by the media outlet. Knowing the corporation was involved in a serious scandal, the media failed to report on those not involved in the scandal or those who possessed the necessary expertise to prevent accounting fraud. Their focus on the negative aspects of this scandal favored individuals who also had a preconceived view of the situation.
The former CEO of Enron, Jeffrey Skilling, lead Enron with an inauthentic leadership style which resulted in the bankruptcy and demise of the company. Since this scandal was conducted behind closed doors, the employees who were unaware of these activities had no idea of what was going on. After the scandal, employees and stockholders were shocked and devastated. Employees lost their job and any stock holdings related to the company (Arnone, 2002). The trust in higher leadership was severely degraded and brought upon a negative view of higher authority in future employment.
In the wake of this scandal, Enron will forever be branded as a company that dealt in theft, lies, and corruption. It will always be referenced as business that did the wrong thing and blackmarked it’s leadership style. They will always be referenced as not what do to in a major corporation. Their actions have caused stricter and more enforced industry standards that every business must follow. Figure one (1) below is the last reported financial statement from Enron. As you can see, they are well within the lead compared to other competitors. Although the results are favorable, it also seems to cast some doubt on the companies reporting information.
Figure 1. Enron’s 2000 reported revenue
At this time in Enron’s demise, there is nothing that could have been done to correct this unspeakable act. The damage has been done. However, for future operations and business, the Enron scandal can be emphasized as a learning tool for future leaders. This can provide a frame work and starting point to learn from.
Conclusion
One of the biggest American companies, Enron, fell bankrupt due to a major accounting scheme resulting in the loss of revenue, employee 401(k) plans, and loss of funds from the shareholders. The actions from Enron’s CEOs clearly depicts inauthentic leadership traits that must not be ignored. These actions have caused many individuals to question the validity of leadership in similar industries.
References
- Arnone, W. J. (2002). Financial planning for employees post-enron. Benefits Quarterly, 18(4), 35-41.
- Segal, T. (May 15, 2019). Enron scandal: the fall of a wall street darling. Investopedia, 1. Retrieved from https://www.investopedia.com/updates/enron-scandal-summary/.
- Semple, J. W. (2002). Accountants’ liability after enron. FDCC Quarterly, 53(1), 85-98.
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