The purpose of this paper is to outline the negative the possible effects of having a leader who lacks integrity. This is important information because it shows that being ethical and acting with integrity not only is good for morality’s sake alone it is also good for all stakeholders of a corporation Stakeholder in this sense is different than a stockholder, by shareholder this paper refers to employees of the corporation, shareholders, customers, and the leader themselves. This paper will be giving an in-depth look into the former CEO of Enron, Jeffery K. Skilling. Skilling was CEO of Enron during the Enron scandal and is a convicted felon as of 2006.
Before the Enron scandal, Skilling was a MBA graduate of Harvard Business School as well as years of high-level professional work experience, which would give an indication that Enron’s collapse was not because of Skilling’s competence as a CEO seeing as he was extremely qualified and had a track record of success. What is integrity? Many papers talk about integrity in business however there are many different interpretations of what integrity actually means in a leadership senseIhe majority of papers written on integrity have definitions that usually can be placed in one of these five groupings, Integrity as wholeness, integrity as consistency between words and actions, integrity as consistency in adversity, integrity as being true to oneself and integrity as moral or ethical behavior.
To that end. the definition of integrity in this paper will be defining integrity as moral or ethical behavior, in other words, behavior that would be deemed socially acceptable. Enron was one of the largest energy companies in the USA and also had one of the hardest drops of a stock too, this was because Enron was hiding its losses through the means of accounting malpractice. Jeffery Skilling who was the CEO of the time was aware of this and did nothing to change it, as evidenced by the felonies he was convicted with in the United States criminal court. While Skilling was only CEO of Enron for less than a year, resigning 4 months before the story of the fraudulent accounting broke, he worked at Enron for over a decade at the executive level working in the financial department.
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Not only were Enron’s stock hit hard, but the company was no longer trusted at all, as all major bond rating firms quickly reduced Enron’s bond rating to junk bonds. (Bonds that have a high chance of defaulting) The combination of an abysmally low share price and junk bond status meant that none but the least risk-adverse investors were willing to even consider investing with Enron, which inevitably made any financing Enron had to do become close to impossible. With the revelation that Enron had far more liabilities than it could possibly afford to pay off, Enron filed for bankruptcy on November 1“ 2001, and Jeffery Skilling was convicted on counts of conspiracy, insider trading, making false statements to auditors and securities fraud.
How Jeffrey Skilling’s lack of integrity played a role Jeffrey Skilling was proven to not only be aware of the fraudulent accounting he was also complacent and attempted to use it to his benefit, selling his shares of Enron 4 months before the news broke. Using this papers definition of integrity, he has failed ethically as allowing this to occur ruined Enron, putting employees out of work, hurting people’s retirement plans and losing money for shareholders. To put it mildly, this is clearly not societally acceptable behavior because it is also criminal and “Provided the judicial system in properly functioning democracies is seen by those making a judgment as having high or at least sufficient integrity itself, laws on which these judgments are based can be regarded as being reasonably in line with the majority of citizens’ moral values and norms’I criminal must also be unethical.
If skilling had a Moral compass he could have fixed this accounting fraud by being the one to expose it to the public, or better yet since he was there and in the executive level while these malpractices were being planned, he could have stepped in and stopped it before it was even a problem. Furthermore acting unethically and without integrity actually harmed Skilling more than acting with integrity would have. Skilling received 12 years in jail and a $45 million dollar fine from the US government. as well as undoubtedly millions more in civil cases. he also is unhirable currently because no shareholder alive would be comfortable with a company that has Jeffery Skilling in it. Comparing that to the alternative where he steps in to stop these accounting practices and he potentially gets fired, he may be unemployed yet he would still have years of experience and his MBA from Harvard business school so finding another executive-level job would not be impossible.
How acting with integrity would have benefited all Enron Stakeholders Acting with integrity not only protects leaders from the consequences of acting without it, there is also a plethora of benefits both to the leader themselves and every stakeholder as weIL In this segment this paper will look into each benefit as well as how it could have improved Enron as well as how it can be applied to any leader. Employees have a positive relationship between work engagement and leaders they perceive as ethical. Leaders who employees perceive as ethical also are likely to empower their employees, which includes giving them opportunities to excel at theirjobs, and increasing work efficiency.
Furthermore it has been proven that employee trust increases the more ethical a leader is, which again not only increases employee happiness but their work performance as well. Employees who were working more efficiently and who had more trust in Enron could have made the need to lie about their financial standing cease to exist. as with their increased efficiency would also come the increased profitability of Enron. Trust between shareholders and management also increases when management works with integrity and ethics. This results in a more accurate picture of the true worth of the company which protects shareholder’s investments. An inaccurate picture of the company’s worth is exactly why Enron ended up the way it did. Leaders who work with integrity not only have increased job protection. they also gain rewards because of the increased efficiency of the people they lead.
Acting with integrity also protects their career and their reputation as well, as proven by Skilling, acting without integrity could get you in a cell and ruin your career. While leading without integrity could result in short term financial gain, ultimately if uncovered destroys ones reputation as well as the company they represent reputation as Jeffrey Skilling shows. Not only does it decay a corporations and a leader’s reputation with shareholders, potentially bankrupting the corporation and black listing the leader. it also ruins ones reputation with their own employees. The employees become dissatisfied, not trusting their leader and become less engaged as a result of this uncertainty. Finally acting with integrity protects not only a leader’s reputation and the company they represent reputation, it also protects them from jail, criminal fines and civil lawsuits.
