Explaining Enron: Communication and Responsible Leadership

Topic: Responsible Leadership

Author(s), Title and Publication

Seeger, M. W., & Ulmer, R. R. (2003). Explaining Enron: Communication and Responsible Leadership. Management Communication Quarterly, 17(1), 58-84.

Summary

Enron, which is the nation’s seventh largest corporation, collapsed in a financial scandal of 2001-2002. This case study explored the reasons for Enron’s demise with principles of communication-based leader responsibilities. The responsibilities include: 1) communicating appropriate values to create a moral climate, 2) maintaining adequate communication to be informed of organizational operations, and 3) maintaining openness to signs of problems.

Media reports and participant accounts were used to analyze responsibility failures of three senior executives in Enron: Kenneth Lay (CEO and founder), Jeffery Skilling (president), and Andrew Fastow (CFO). Instead of integrating its RICE values (respect, integrity, communication, and excellence) into operations, Enron’s senior executives modeled values of greed, ambition, risk taking, and a view that established rules and norms did not apply to them. The leaders also failed in their responsibility to be informed about company operations, and were unaware of any financial arrangement designed to conceal liabilities or inflate profitability. In addition, though open communication is one of Enron’s core values, the company did not act in a manner consistent with the statement. Analysis of the Enron case provided several insights for managerial communication and called for positioning responsibility more centrally in managerial communication.

Implications for Practice

The Enron case offers some lessons for leaders who may prevent such crises if they: 1) behave consistently in line with corporate values to create an appropriate ethical climate; 2) keep informed about organizational operations; 3) remain open to bad news, dissent, warnings, and signs of problems; and 4) choose traditional business values or standards over a narrow set of values such as profits, stock values, and personal wealth.

Location of Article

The article is available online at: http://mcq.sagepub.com/content/17/1/58 (abstract free, purchase full article)

 

 

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