Reference no: EM131665604

Enron: What Caused the Ethical Collapse?

Introduction

Kenneth Lay, former chairman and chief executive officer (CEO) of Enron Corp., is quoted in Michael Novak's book Business as a Calling: Work and the Examined Life as saying, "I was fully exposed to not only legal behavior but moral and ethical behavior and what that means from the standpoint of leading organizations and people." In an introductory statement to the revised Enron Code of Ethics issued in July 2000, Lay wrote: "As officers and employees of Enron Corp., its subsidiaries, and its affiliated companies, we are responsible for conducting the business affairs of the companies in accordance with all applicable laws and in a moral and honest manner." Lay went on to indicate that the 64-page Enron Code of Ethics reflected policies approved by the company's board of directors and that the company, which enjoyed a reputation for being fair and honest, was highly respected. Enron's ethics code also specified that "An employee shall not conduct himself or herself in a manner which directly or indirectly would be detrimental to the best interests of the Company or in a manner which would bring to the employee financial gain separately derived as a direct consequence of his or her employment with the Company."

Questions for Discussion

1. What led to the collapse of Enron under Lay and Skilling?

2. How did the top leadership at Enron undermine the foundational values of the Enron Code of Ethics?

3. Given Kenneth Lay's and Jeff Skilling's operating beliefs and the Enron Code of Ethics, what expectations regarding ethical decisions and actions should Enron's employees reasonably have had?

4. How did Enron's corporate culture promote unethical decisions and actions?

5. How did the investment banking community contribute to the ethical collapse of Enron?

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