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Skilling Case

Adali Cantu

Department of Org. Leadership, South Texas College

ORGL -3332- KV2: Behavior / Ethics/ Leadership II

Dr. Scott Sparrow

March 3rd, 2022

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Skilling Case

Every corporation aims to be successful and be recognized as a Fortune 500 company

that would set them apart from other businesses. Companies make money by creating a need or a

want for a service that will influence potential customers to buy from them. The leaders of such

corporations have the responsibility to oversee the entire operation, provide direction and set the

tone while they serve as a representative of the company. Moral and ethical values in business

are important as it drives consistency with the acceptable behaviors and practices regarding

debatable subjects that may arise. Enron was a company that made money through gas and

energy commodities. The great success that they held in the previous years and the prestigious

recognition received as the most innovative company on Fortune 500 magazine (ColdFusion,

2019) created a vice for increased power for the CEO. Therefore, being motivated by power and

money led to poor behaviors being encouraged which placed greed and competition above

business ethics.

There are several approaches to leadership and leaders are often hired or promoted whom

acquire the specific traits needed that can benefit the company based on the situational state of

the organization. In the case of Enron, the company was needing a leader that could bring in

more money into the business. Skilling was hired by Lay as the CEO to move the company

forward. He possessed traits of a charismatic leader, he was persuasive, a risk taker, with his

sight on power and money (Silverstein, 2013). As the new CEO, Skilling came in with the

objective of making money. His vision for the company was to make Enron a stock market for

natural gas with the goal of having unlimited amounts of money flowing in. The way he could do

this was by changing the way they accounted for their business deals. For example, he
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introduced mark to marketing accounting which meant that they could write profits for deals

signed by day, for whatever they thought it was worth even if they didn’t receive a cent or if the

deal fell through over time (ColdFusion, 2019). This approach made the company look good on

paper to be attractive in the stock market verses what was earned which led to the beginning of

the great deception.

With change in leadership, comes along a new set of expectations in any organization.

Expectations are defined and communicated to employees by the leaders of the company and are

deemed necessary to align with the new company objectives. Skilling’s vice was to have power

and money. To do so, he needed to know he had employees that bought into to his vision without

questioning his direction and would deliver by any means necessary. Skilling’s next step was to

assess his team and did it by introducing a rank-based performance evaluation. Moreover, he felt

it necessary to motivate his team by unlocking human instincts such greed and competition

among them to set his plan in motion (ColdFusion, 2019). This would allow him to identify those

merciless employees that could get him closer to his goal and eliminate those that did not meet

the standard of performance expected for the next phase.

Furthermore, with the high expectations set to bring in endless amount of cash in, came a

great amount of stress among the employees. Because Skilling created a culture of

competitiveness, greed, and the reduction in workforce, employees that remained feared for their

jobs. Employees worked an excessive number of hours, did everything Skilling would ask of

them as he had a justification for everything, and employees believed him, so they did as they

were told to stay employed. Skilling’s ability to influence, the fear projected to employees

allowed him to manipulate their actions. However, any employee with a moral compass, asking

the right questions, would have an inkling of knowing right from wrong and can decide for
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themselves whether they want to engage in unethical behaviors. Integrity is the most valuable in

tangle asset one can possess and determines the reputation for any individual.

The serious mismanagement by the executive leaders led the company to create a culture

filled with corruption, deception, and greed. The executive team had no regard for ethics, they

used manipulation to get what they wanted, they took advantage the employees by encouraging

them to gamble whatever spare money they had into company stock while executive leaders

cashed in and cashed out their company stock (ColdFusion, 2019). During Skilling leadership,

billions of dollars were stolen from people, he sold his shares and left before the business

crumbled indicating he was intentional with every strategic move and the upcoming collapse of

the company. He had no remorse over his actions while as a leader of the company nor did he

have pity for those he used as an instrument to fill his pockets. A leader with a moral compass

would never steal from people or ask employees to act unethically so they could keep their jobs.

A leader with ethics models a high moral standard, act with integrity, convey fairness and respect

to promote an environment where morals and beliefs are the guiding principle to business

practices. These corporate principles and ethical conduct are important in any business as it can

make or break a company if it lacks the basic business fundamentals of how business should be

managed.

The company is at a critical point where it can be detrimental to the business, the current

practice of doing business is not aligned with the ethical standards and not doing anything can

impact many people negatively. The former CEO created a culture of greed, manipulation and

corruption, the new direction would be to promote values of respect and integrity in everything

we do to break the cycle the unethical behavior discovered. The approach would be to change the

frame of mind of those that remain in the company by influencing employees to think of business
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ethics as the biggest investment they will make in their lives and the job security it provides.

When we lead with integrity we gain trust from our customers, among employees, it creates

ownership and allow them to speak up when behaviors or direction given is not aligned with

business principles of the company without fear of retaliation. This in turn will cause employees

to become proud of and loyal to the company, increase productivity which leads to increased

profits, sustained success, and stability.

Moreover, it would be beneficial to engage leaders within the business on the new vision,

the expectation with modeling proper ethical behaviors, communicate business objectives going

forward and how each leader will be held accountable for their actions. Furthermore, stop the

mark to marketing accounting, we would need to go back to accounting for accurate evaluations

of profit with any business deals. This would require proper follow up with finance team to

ensure direction is being followed and business deals are accounted for properly. In addition,

meet with the stakeholders of the company to communicate why change is necessary and

demonstrate that you are committed the business as the new CEO. You are there to look out for

the best interest of the company, their investment but also the employees and those that do

business with Enron. As a new CEO being a leader can be challenging, there will times when

situations can test our ethics, but one should act and do what is right by all those you represent

not for your personal interest. As a leader you are responsible not for doing the job yourself but

for the employees who are responsible for your customers and the job and trusting them to do the

right thing by providing them with the proper business fundamentals of doing business ethically.

Companies strive to be part of the elite; they want to become one of those fortune 500

companies. They want to be a company that makes profit for their investors but that is also there

to promote success for its employees. For Enron there was a loss of direction, they forgot the
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essential virtues needed to maintain their status as a Fortune 500 company. Their vice for money

and power led them in the wrong direction. Because they were unable to see the mistakes made

to correct the path they were headed in, they impacted so many people’s livelihood in the

process. As previously stated, all companies want to become that Fortune 500 company and can

easily be tempted to conduct themselves unethically. Unfortunately, the task is not just getting

there. The greater challenge is to maintain the status and be that company that can sustain

success. There must be a strong foundation where a company can overcome the mismanagement

of one individual. All companies should strive to have a culture where business ethics, moral

values and policies will be able to survive the mismanagement of a few leaders. If the foundation

is solely based on increasing profits, it would crack, the whole corporation can come crashing

down and leaders can incur legal repercussions with irreversible damage to their brand.
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References

ColdFusion. (2019, August 30). youtube.com. Retrieved from The Biggest Fraud in History.

Silverstein, K. (2013, May 14). Enron Ethics and Todays Corporate Values. Retrieved from

Forbes.com.