I want to use this as an opportunity to elaborate on some thoughts I’ve had regarding my final paper. Obviously we have spent a lot of time talking about Enron as an organization, and I think that the three themes I am covering in my paper can definitely be applied to Enron. First, I’ll recap what my paper topic is. I want to explore the idea that certain laws govern organizations. What laws? Is it the laws that our government puts in place and publicly enforces? Is it the societal laws that Scott and Davis talk about, such as laws that determine the power structure of organizations? Or is it the laws of morality that the determine that the behavior of human beings, and thereby influence the impact we have on the organizations with which we are a part? Another reason I am interested in relating these ideas to Enron is because I can’t help but wonder if these concepts actually do all apply to Enron, or if I am just stretching to make them apply because Enron happens to be the only company we have really scrutinized this semester.
The one theme that definitely does apply to Enron is the idea of the legal influence over organizations. Although this was not the case initially, as Enron continued to evolve, legal policies definitely played a role in the development of the organization. What was interesting at Enron was the distinction between where governmental law actually mattered, and where it was actively overlooked for the purpose of ensuring that it would NOT play a role. For example, the mark-to-market book keeping methods at Enron were technically not “illegal,” but they certainly flirted with the line between what is was acceptable and what was not. What was illegal, however, was their choice to withhold information for their investors regarding how they were reporting. So, they effectively managed to appear to be operating in a way that appealed to the individuals who were funding the operations, while all the way they were crafting ways to dupe these investors into pouring more and more money into a company that was giving them absolutely no return.
As influential as government imposed laws were on Enron, so were the societal laws that were discussed in some of our Scott and Davis readings. The chapter that comes immediately to mind is chapter 8, which talked about power and how it impacts companies. Scott and Davis talk about how the most effective type of power is power that is deemed “legitimate” throughout the organization. They argue that legitimized power, or power that has clearly been earned, is essential to the success of any organization. I believe that the lack of legitimized power at Enron significantly contributed to its fall. Skilling and Fastow are two names that definitely stand out as being rewarded power that was completely undeserved, which in turn contributed to Enron’s demise. Skilling was unfit to manage anyone beyond himself, and Fastow’s ability to analyze, manipulate, and misconstrue reality should not have been viewed as an ability to effectively manage a trading floor. These are just a few examples of why I believe that the fall of Enron can be applied to the concept that societal laws might have a significant influence on the evolution of organizations.
The last thing I plan to talk about, which I also believe applies to Enron, is the way psychology can be used to explain certain behaviors. One theory that comes to mind is one that is discussed in chapter 2 of Scott and Davis’s book. . They explain that “subjects placed in an ambiguous situation were much more likely to accept influence from another when that person was defined as holding a specified organizational position” (Scott and Davis, pg. 39). This reflects a psychological experiment carried out by Stanley Milgram at Yale University, where he proved that individuals were able to legitimize the administration of delivering shocks to others when they believed they were under the authority of an organized, formal experiment team. I believe that some of the employees at Enron justified their own immoral behavior by convincing themselves that it was okay as long as it was under the umbrella of a formal organization.
If anyone has any other suggestions regarding other companies where I may be able to apply these concepts, or if anything else about Enron stands out as undeniably applicable, please let me know! Thanks!