U01: Enron’s Slippery Ethical Slope

The demands on today’s corporations underline the necessity of establishing and maintaining strong ethical leaders and practices to foster sustainability and longevity. One such example of the disastrous consequences of neglecting ethical considerations is the meteoric rise and calamitous fall of Jeff Skilling, CEO, and his company, Enron. Screaming growth and soaring profits along with irresponsibly rapid market restructuring eventually deteriorated into civil and criminal litigation resulting in fraud, conspiracy, and insider trading convictions. A great deal of investigation has gone into the company policies and standard operating procedures established to allow the company to operate dysfunctionally, but additional scrutiny into the company and its leader’s ethical framework, or lack thereof, could reveal new perspectives.

Padilla, Hogan, and Kaiser’s (2007) toxic triangle, founded on the notion that a toxic circumstance, like Enron’s fall, involves toxic leaders, susceptible followers, and conducive environments. Enron had several toxic leaders with charisma, a need for power, a history of misusing power, narcissism, negative life themes (Padilla, Hogan, & Kaiser, 2007) along with other vices and temptations. These individuals provided guidance and leadership for followers that Padilla, Hogan, and Kaiser (2007) would characterize as susceptible conformers and colluders. Finally, Enron’s toxic triangle was complete with an environment fraught with instability, internal and external threats, dog-eat-dog cultural values, and no form of checks and balances (Padilla, Hogan, & Kaiser, 2007).

Enron employees, lead by Jeff Skilling and company president, Kenneth Lay, carried out business within this toxic triangle without any hint of ethical framework to guide decision making. This lack of regard for, or implementation of, ethical practices resulted in leaders and employees engaging in an alarmingly high number of indicators utilized by Dr. Jean Lipman-Blumen (2010), a respected researcher in the field of toxic leadership. Some of those specific behaviors include intentionally working to deceive clients and lobbying for normalization of that deception, nurturing a culture of fear and threat, deflecting failure, and accepting undue credit for success. Very simply, ethical consequentialist theory suggests that behavior that results in more harm than good is unethical and behavior that results in more good than harm is ethical (PSU, 2018b). As can be observed with Enron and other such companies, leaders that choose to forgo even the simplest ethical considerations and deceive customers, facilitate toxic work environments, and give into narcissistic vices, often end up with tarnished reputations, no career prospects, and potentially prison sentences. 

Jeff Skilling was the CEO, and the buck certainly stops with him for the lack of ethical operations; however, according to the toxic triangle, he had to have colluding and conforming followers to perpetuate the dysfunction (Padilla, Hogan, & Kaiser, 2007). Enron leaders and their followers all shared a vice, or weak point (PSU, 2018a): the unmitigated ambition to increase profits with congruent values, beliefs, and world-views discussed by Padilla, Hogan, and Kaiser (2007) in their work on colluding followers. Those employees not engaged directly in colluding behaviors, but not actively attempting to operate in an ethical framework, are conformers. These employees fell victim to intimidation and fear to the point that they felt paralyzed. Employees feared undesirable relocation, character assassination, and ultimately termination if they did not conform. Cynthia Cooper, Coleen Rowley, and Sherron Watkins were able to acknowledge that the current practices and behaviors were causing more harm than good, and determined for themselves that while they may incur harm for speaking out, they were protecting and helping countless clients and employees from continued and future harm. Without knowing it, they were loosely applying the Consequentialist Framework of ethics, primarily focused on the future effects and outcomes of a situation (Bonde, et al., 2013).

According to Padilla, Hogan, and Kaiser’s (2007) triangle, leaders and followers require a conducive environment for toxicity to thrive. This means instability, threat culture, and zero oversight assisted the progress of the pernicious leadership. Enron’s inventive reimagining of the energy market to mirror stock trading, coinciding with partisan governmental industry deregulation, cultivated unforeseen instability. The threatening company culture bolstered negativity and fear, and with no internal or external oversight, unethical behavior and standard operating procedure ran rampant. It does not take much to connect the dots that unethical political behavior may have set the stage for the conducive environment Enron capitalized upon. 

It might seem easy to fall down the slippery slope of mentally dismissing one or two unethical leaders, directly supporting or turning a blind eye to unethical company culture, or capitalizing on an unethical atmosphere. Once speed down that slope picks up, as with Enron, people lose their jobs, go to jail, and have their lives torn apart. Enron developed toxic leadership, nurtured colluding followers, oppressed conforming employees, and capitalized on an unethically ripe environment. One could argue application of even the simplest ethical framework at any angles of Padilla, Hogan, and Kaiser’s (2007) toxic triangle could have prevented the massive snowball of disaster at the bottom of Enron’s slippery ethical slope.References

Bonde, S., Firenze, P., Green, J., Grinberg, M., Korijin, J., Levoy, E., Naik, A., Ucik, L., & Weisberg, L. (2013, May). A framework for making ethical decisions. Retrieved from http://www.brown.edu/academics/science-and-technology-studies/framework-making-ethical-decisions

Lipman-Blumen, J. (2010). Toxic leadership: A conceptual framework. In F. Bournois, J. Duval- Hamel, S. Roussillon, & J. Scaringella (Eds.), Handbook of top management teams (214-220). UK: Palgrave Macmillan.

Padilla, A., Hogan, R., Kaiser, R. B. (2007). The toxic triangle: Destructive leaders, susceptible followers, and conducive environments. The Leadership Quarterly,18(3), 176-194.

PSU. (2018a). PSY 533: Ethics and Leadership. Lesson 2: Vices and Temptations. Retrieved from https://psu.instructure.com/courses/1913945/pages/l02-overview?module_item_id=25041764

PSU. (2018b). PSY 533: Ethics and Leadership. Lesson 3: Ethical theories. Retrieved from https://psu.instructure.com/courses/1913945/pages/l03-overview?module_item_id=25041775

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