There are a host of reasons that le

There are a host of reasons that led to Enron’s collapse. Taken together, answers to all the questions stated here address this particular question more completely. To summarize, Enron’s collapse was caused by: (1) A corrupt leadership at the top, (2) Violation of laws that were not enforced by the company’s CEO, Chair and members of its Board of Directors, and auditors (Arthur Andersen), (3) Lack of regulation Enron had one of the best ethics code in the industry. The collapse of the company clearly illustrates that written ethics and compliance codes alone do not work. Corrupt leaders at the top (and middle) of organizations is a recipe for disaster. Probably no code or law can prevent the willful intent with the available means for criminally minded and greedy CEOs (Lay and Skilling), CFOs (Fastow) and other top level officers (individually and as coalitions) from defrauding and stealing from their organizations. Secondly, as the Sarbanes Oxley Act and the Revised Federal Sentencing Guidelines show, effective communication, monitoring, and auditing of the organization’s legal and ethical compliance standards and procedures must be enforced. Kenneth Lay paid lip service to ethics. He said he fully understood the legal, moral, and ethical implications of leading organizations and people. In an introductory statement to the revised Enron Code of Ethics issued in July 2000, Lay emphasized that Enron’s officers and employees should conduct the company’s business affairs “in accordance with all applicable laws and in a moral and honest manner.” Enron’s ethics code was based on the values of respect, integrity, communication, and excellence. The code 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.” So much for ethics codes with leaders who do not ‘walk the talk.’ Answers to the following questions add to the response given here.

Lay and skilling also created a corrupt elite coalition among themselves, Fastow, and several of the traders in the company. The now classic film , “Enron: The Smartest Guys in the Room” reveals the inside workings of this courrupt subculture that became the dominant engine that drove the company into bankruptcy—without the lower level employees ever knowing. Do values count? Yes, in Enron’s case, the dominant coalition’s values were greed, flamboyance, waste, and win-at-any-cost.