ENRON

Ethical Theories of Leadership In the following paragraphs two ethical frameworks will be utilized to help explain what was missing in the leadership at Enron that allowed its particular culture to develop. From an ethical perspective, one need look no further than the tradition of ethical egoism to help explain how and why a culture of narcissism emerged within Enron. According to Pojman (2006), ethical egoism is loosely defined as, “the doctrine that it is morally right always to seek one’s own self-interest” (p. 81). Within the broad parameters provided by that definition, Pojman argues that there are roughly four different types of ethical egoism: psychological egoism, personal egoism, individual egoism, and universal ethical egoism (pp. 81-82). Of the four kinds of egoism proposed by Pojman, universal ethical egoism most closely aligns itself with how Enron’s culture developed. The theoretical basis for universal ethical egoism consists of, “a theory that everyone ought always to serve his or her own self-interest. That is, everyone ought to do what will maximize one’s own expected utility or bring about one’s own happiness, even when it means harming others” (p. 87). In order to become theoretically grounded, universal ethical egoism makes use of a sophisticated argument that consists of individuals giving up their short-term interests in pursuit of long-term ones. At the core of the argument lies the concept that everyone is encouraged to seek their own self-interest, however, in order to do so, some compromises are necessary. This type of rationalized self-interest forms the basis of the universality of ethical egoism and helps to conceptualize, at least from an egoist perspective, the basic foundations of Hobbesian liberty. Remarkably, the leaders at Enron (i.e. Lay, Skilling, Mark, et. all) were all complicit in the propositioning of this inimitable form of ethical egoism. They surmised that the short-term compromises promulgating the long-term development of selfinterest within the company’s organizational culture were indeed derivative of ethical corporate behavior. At Enron, the pursuit of rationalized self-interest was taken to such an extent that the concept of compromise, even at the expense of other ethical considerations like integrity, became nomenclature for how to do ethical business in a capitalistically based free market economy. The effect of leadership’s validation of this type of business philosophy was the development of a narcissistic corporate culture. In an article by Gini (2004), business ethicist and accountant John Dobson comments that in this way, “Ethical guidelines are viewed in the same way as legal or accounting rules: they are constraints to be,

In the words of Pojman (2006). integrity was a non-factor and a complete missing link for leadership when it came to establishing a bottom line for subordinates. p. the principle of justice is considered a priori within the Frankenaian system. Self-interest and ethical compromise provided the platform for Enron’s leaders and employees to justify behavior like the PRC’s policy of “rank and yank” that should not have been condoned. 2006. The architect of mixed deontology was the University of Michigan philosopher William Frankena. The overt application of the universal ethical egoistic framework subverted any attempts within Enron’s organizational structure to maintain other ethical principles or the integrity of accountability systems of management such as the Peer Review Committee (PRC). circumvented or just plain ignored in the pursuit of selfinterest. group members fell prey to a culturally reinforced mentality of serving their own rationalized self-interests at the expense of the overall health of the company and its shareholders. human beings were to strive to do good without demanding that there be a measurement or weight put on good and evil. 150). 150). Of the two fundamental principles. Although Frankena’s innovative approach provides fertile territory for the reconciliation of the competing systems of utilitarianism and deontological ethics. 2. Without an honest system of accountability or practiced standard of ethics in place within the leadership hierarchy at Enron. As mentioned above. p. In Frankena’s philosophical model. Frankena further provided four subprinciples arranged hierarchically to help explain the principle of beneficence: 1. the opposing systems of teleology and deontology were reconciled through the principles of beneficence and justice (Pojman. Another ethical perspective from which one may view the development of the culture at Enron is from the framework provided by mixed deontological ethics. one major criticism of the theory rests with how one adjudicates between the . One ought to remove evil. One ought to prevent evil or harm. One ought not to inflict evil or harm. One ought to do or promote good. a bottom line based solely on profit maximization and performance increase in the market share value of the company. 150). 3. unless a strong case can be made for overriding this principle” (p. 2).wherever possible. the principle of justice. The second principle in Frankena’s system of mixed deontology is the principle of justice (Pojman. According to the first principle. or in the pursuit of the misconceived interests of the organization” (p. 4. “…involves treating every person with equal respect because that is what each is due…there is always a presumption of equal treatment.

In reference to ethical corporate leadership. and Excellence. it should come as no surprise that an organizational culture deeply rooted in narcissism developed at Enron.” and vision and values statement of. 78-79). In response to this criticism. “We need to use our intuition whenever the two rules conflict in such a way as to leave us undecided on whether beneficence should override justice” (p. 2002). The corporate behavior engendered from this kind of cultural environment compromised the long term health of the company and eventually led to Enron’s demise. the overindulgence of rationalized selfinterest and universal ethical egoism on the part of the traders. the abuse of transformational and charismatic leadership by Lay and Mark. states that. These are the individuals who set the behavioral tone for their legions of employees…Their personal behavior ultimately defines the ethical culture for everyone in the company and they inflict untold damage when they fail to recognize the enormity of this responsibility (pp. 151). Communication. Integrity. and the lack of either a utilitarian or a deontological system of practiced ethics at Arthur Anderson. the ways in which Enron’s leaders responded to the kind of moral conflict alluded to in Frankena’s hybrid system of mixed deontological ethics helped to define the cultural atmosphere at Enron. this disconnect between words and action developed into a major cultural problem for leadership within the organization. Pojman states (2006). Roger Leeds. Not surprisingly. In the following paragraphs the paper will examine the United States Congress’ policy response to the implosion of Enron as well as identify and apply two policy theories to help explain whether . Overall. the Director of the Center for International Business and Public Policy at the Paul H. Considering the complete absence of the leadership trait of integrity in Skilling. “Respect. “We treat others as we would like to be treated ourselves…We do not tolerate abusive or disrespectful treatment. callousness and arrogance don’t belong here” (“Ruined by Enron”.two principles amidst a moral conflict or ethical dilemma. Frankena offered an intuitive approach to resolving moral conflict and competition between the principles of beneficence and justice. Ruthlessness. In the case of Enron and its cultural development as an organization it seems that the principles of beneficence and justice were neither in conflict nor markedly present despite the company’s robust motto of. Nitze School of Advanced International Studies at Johns Hopkins University. Enron’s leadership simply did not live out the ethics they claimed to have valued.

.or not the legislative response in dealing with the development of this kind of corporate culture was effective.

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