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GRAD LEVEL - Briefly describe a major corporate scandal in an organization such as Enron, Martha Stewart Omnimedia, WorldCom, etc. Explain how the leader's use of power contributed to the organization's problems. What can organizational leaders learn from these and other similar cases?

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Briefly describe a major corporate scandal in an organization such as Enron, Martha Stewart Omnimedia, WorldCom, etc. Explain how the leader's use of power contributed to the organization's problems. What can organizational leaders learn from these and other similar cases?

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Corporate Scandal: Enron

Enron's main error was that it lied about its profits and stands accused of a range of shady dealings, including concealing debts so they didn't show up in the company's accounts.

source: http://news.bbc.co.uk/1/hi/business/1780075.stm

Enron had created offshore entities, a unit which may be used for planning and avoidance of taxes, raising the profitability of a business. This provided ownership and management with full freedom of currency movement, and full anonymity, that would hide losses that the company was taking. These entities made Enron look more profitable than it actually was, and created a dangerous spiral in which each quarter, corporate officers would have to perform more and more contorted financial wizardry to create the illusion of billions in profits while the company was actually bleeding cash.

This practice drove up tard stock price to new levels at which point the executives began to work on insider information and trade millions of dollars worth of Enron stock. The executives and insiders at Enron knew about the offshore accounts that were hiding losses for the ...

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Sandeep Bardia, MBA
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  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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