Cases in Leadership and Change 2023-2024

Semester 2
Lecturer: João Fialho Faustino

Case Study 3
Enron Ethics

Amsterdam University of Applied Sciences

L. Berger 500857304
G. Beukers 500714677
L.M. Cebulla 500848255
E. Eriksson 500942775
A.Boukia-Iskov 500896996

Amsterdam
March 21, 2024
Table of contents

1. Introduction................................................................................................................................................ 1
2. Case Questions........................................................................................................................................... 1
2.1 Question 1................................................................................................................................................ 1
2.2 Question 2................................................................................................................................................ 2
2.3 Question 3..........................................................................................................................................2
2.4 Question 4..........................................................................................................................................3
3. Conclusion..................................................................................................................................................3
References...................................................................................................................................................... 4
Contribution Table..........................................................................................................................................6
1. Introduction
As Peter Drucker said “Management is doing things right; leadership is doing the right things”
(Dublino, 2023). But what is the right thing to do? Determining the right course of action can be complex
and subjective especially when ethical considerations are involved. Ethics are a set of values, beliefs, and
character traits that are considered moral and ‘good’ by individuals and society (Bartneck et al., 2021). If
a company fails to meet these social expectations, the consequences can be devastating.
One example of such aftermaths is seen in the ethics and leadership dilemmas at Enron. Enron
was a successful US energy company during the 1990s, however, Enron’s leaders enforced a purely
profit-driven organizational culture, concealing debt in subsidiaries by using fraudulent accounting
methods. This alienation of ethical values led to the firm’s default in 2001 (Sims & Brinkmann, 2003).
But how can a deeply rooted organizational culture and leadership entail such an outcome? How
can Enron’s case be seen in the context of ethical leadership? How did Enron experience servant and
authentic leadership? And could female leadership have prevented the collapse of the company? In the
following, these questions are answered based on the case of Enron. Furthermore, servant leadership at
Enron is compared to the company Meta and Enron’s authentic leadership is set in contrast to the firm
ByteDance.

2. Case Questions
2.1 Question 1
Albert Einstein said “Only morality in our actions can give beauty and dignity to life’’, a quote
that Enron executives did not heed. The five principles of ethical leadership are respect, service, justice,
honesty, and community-building for, toward, and with others.
Firstly, respect for others, encompassing dignity, empathy, and tolerance, was absent at Enron.
The firm’s organizational culture, mirrored by its leaders behavior, prioritized profit over all else and
pushed employees’s beyond their limits (Sims & Brinkmann, 2003). As rules and morality were viewed
as obstacles to financial succes, unethical and disrespectful behavior thrived (Sims, 2000).
Secondly, service to others entails prioritizing the needs and growth of followers above personal
interests. However, at Enron, ex-CFO Andrew Fastow pursued partnerships benefiting himself and his
associates, to the detriment of stakeholders. These actions are deemed unethical from both deontological
and teleological perspectives (Rowe & Guerrero, 2019). Even according to Milton Friedman, who
prioritizes profit-making over business ethics, Enron's actions can be classified as unethical as
shareholders were deceived by the company's leadership (Fineman et al., 2005).
Thirdly, Rowe & Guerrero (2019) stress the significance of justice in leadership, advocating for
fairness and transparency in decision-making. However, Enron's reward system prioritized results over
ethics, as evidenced by Skilling's approval of rule-breaking behavior for profit. The company's “rank and
yank” policy fostered a toxic work environment, eroding trust and perpetuating anxiety among employees
(Edmondson, 2018).
Furthermore, honesty is a cornerstone of ethical leadership, as lying erodes trust between leaders
and followers as stressed in the case of Enron. A former vice president described Enron's school of
thought on honesty as “The moral of this story is break the rules, you can cheat, you can lie, but as long as
you make money, it's all right” (Schwartz, 2002).
Finally, ethical leaders unite teams by aligning goals with shared values and fostering collective
commitment. However, at Enron, this meant prioritizing profits and personal gains, leading to a
breakdown in teamwork. Public performance evaluations further intensified this issue, fostering a culture
of openly criticizing poor performance. Comparing the CEO Skilling to Darth Vader and Machiavelli
(Schwartz, 2002) setting the fate of Enron in stone by its unethical leadership.

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 2.2 Question 2
Greenleaf (1991) defines servant leadership as making “sure that other people's highest priority
needs are being served”. Servant leaders want to guide in a way that advances the organization's and
society's overall interests, focused on “ethical and caring behavior [aiming to] enhance the growth of
workers while improving the caring and quality of organizational life” (Spears, 2010).
Although Enron is not charaterized by this definition of servant leadership, an interesting
perspective to analyze is the way that leaders and managers deceived themselves into thinking they were
acting as servants. Sims and Brinkmann (2003) depict an employee at Enron, showcasing a self-image of
being exceptionally clever and invincible. Such a distorted self-view arguably leads to justifying all
means that lead to an end. Further, the idea of letting employees take as many vacation days as they want
as long as they meet targets is questionable and short-term oriented. The managers enforcing this policy,
however, might have thought that they were acting as servant-leaders by providing freedom and flexibility
to good workers. Yet, the acknowledgment of the policy's role in perpetuating unethical and fraudulent
behaviors was disregarded. Another example of this is “Car Day” where the most successful employees of
Enron received super sports cars as gifts for their performance (Sims & Brinkmann, 2003). An
indoctrinated manager might perceive this as an example of servant leadership by fostering a culture of
rewards, whereas this is a perverted and alienated version of it and does not aid the greater good.
When comparing this to Meta, previously Facebook, an entirely different culture is found.
Whereas managers at Enron were described as aggressive and ruthless, a former Facebook employee
describes Meta managers as “an ally and a cheerleader for your team while positively influencing the
direction of the team” (Jagadeesan, 2021). At Meta, the purpose of a manager is to continuously ensure
the well-being and growth of members of the team, anything else coming only after this has been
achieved. In retrospect, the culture at Enron was the exact opposite; managers only cared about the
bottom line and never about the employee themself, as a servant leader would.
2.3 Question 3
Authentic leadership, characterized by a great emphasis on ethical values, describes a leader who is
defined by a higher moral character. This implies that authentic leaders inspire others with their
transparency and authenticity through practicing solid values, leading with passion, heart, and head
toward a purpose (Avolio & Gardner, 2005). In addition, these leaders are motivated by personal
convictions, not by personal benefits such as status (Ibid), and commit themselves to an ongoing process
of becoming self-aware. Consequently, this self-awareness fosters an environment for transparent
decision-making and trust-building within relationships (Avolio & Gardner 2005).
In reference to the former leaders of Enron, it becomes evident that the degree of authenticity is
low. This is exemplified by numerous incidents in which the company promoted crossing ethical
boundaries for short-term advantage. Moreover, the level of trust was minimal at Enron due to peer
grading which fueled internal distrust. Enron’s leaders did lead with head, but not with heart, as they were
not passionate for serving the greater good of the organization but for personal benefits. For instance,
Jefferey Skilling aimed to build loyalty through money and maximize profits for his well-being. All these
aspects indicate that Enron was not led by an authentic leader with a moral perspective.
To give an example for authentic leadership, one can observe ByteDance, a firm led by Zhang
Yiming until May 2021 (Bytedance ,2020; Kharpal, 2021). When comparing his leadership style to that of
Enron’s leaders, it can be seen that Zhang is self-aware and relationally transparent. These, along with
internalized moral perspective and balanced processing, are key elements of authentic leadership (Rowe
& Guerrero, 2019). For instance, Zhang wrote a letter to employees after resigning, stating that he lacks
certain skills that make an ideal manager, as his focus lies on analyzing organizational and market
principles. Thereby Zhang showcases that he is transparent as well as self-aware about how his leadership

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style affects the company, indicating authentic leadership (Bytedance, 2021). Nevertheless, it is crucial to
note that the key elements mainly fall under one approach of authentic leadership, the intrapersonal
approach. This approach prioritizes the leader's self-awareness, where their actions are a manifestation of
their personal values (Rowe & Guerrero, 2019). When looking at Zhang’s leadership from an
interpersonal approach, which emphasizes the relational aspect between leaders and followers, it suggests
that Zhang might not be authentic (Rowe& Guerrero, 2019). In his letter, Zhang made clear that he is “not
very social and preferring solitary activities” (Bytedance, 2021).
2.4 Question 4
Research on gender differences in leadership styles yields conflicting results, with some scholars
asserting no disparities while others suggest significant variations that are discussed in the following.
Firstly, women exhibit a more transformational and collaborative leadership style than men do
(Chin, 2011; Hoyt, 2010). Compared to their male counterparts, women leaders are regarded as being
more adept at collaboration and teamwork, relationship-building, and inspiring and motivating others
(Gipson et al., 2017). In contrast, male leaders at Enron showed clear indications of a transactional
leadership style, focusing on short-term goals and a strong punishment and reward system (Sims &
Brinkmann, 2003). Enron's leadership failed to form a participative organizational culture and bring
forward change, which a more transformative style of a woman's leadership could have achieved.
Secondly, women demonstrate an interpersonal and democratic leadership style and more
compassionate communication, whereas men engage in an autocratic leadership style and direct
communication (Gipson et al., 2017; Evans, 2010; Rhode, 2017). At Enron, autocratic leadership with
direct, aggressive communication was prominent, yet compassionate and responsible leadership was
missing (Sims & Brinkmann, 2003). Particularly, in the face of critiques by employees, auditors, and
analysts, when Enron’s leaders decided to not listen and exercise authority at all costs, a woman's
democratic leadership and empathetic communication could have changed the course of conduct at Enron.
Thirdly, women tend to integrate a variety of stakeholder perspectives into their decision-making,
leading to more moral reasoning (Gipson et al., 2017). Furthermore, Hoyt (2010) argues that women
exhibit stronger integrity while men display slightly higher assertiveness. At Enron, leaders proved
extreme assertiveness and self-interest by considering nothing but the short-term bottom line and personal
benefit in their decision-making (Sims & Brinkmann, 2003), which, according to this theory, would have
been less likely with a female leader.
To conclude, it can be argued that typical female leadership characteristics such as a tendency to
transformational leadership, compassionate communication, and higher moral integrity certainly would
have benefited Enron and could have broken the vicious cycle of fighting for profits at all costs. However,
in the end, it completely depends on the individual's leadership skills. A man could embody these
attributes just like a woman, as the differences between individuals remain much stronger than those
between the two genders (Hoyt, 2010).

3. Conclusion
To conclude, this report has analyzed the key dilemmas in Enron’s leadership with regard to
ethical considerations, alongside an assessment of the extent of servant and authentic leadership within
the firm. A disregard for all five ethical leadership principles has been identified as a core component of
Enron’s self-perpetuating system and profit-driven organizational culture. Furthermore, the comparison to
leaders at Meta and Bytedance reinforced the impression that Enron’s leaders exhibited limited abilities to
serve their followers in a compassionate, altruistic, and heart-guided manner. Finally, it has been inferred
that the adoption of typical traits associated with female leadership could have altered the course of
conduct at Enron, although such characteristics could have been embodied by individuals of any gender.

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References
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Avolio, B. J. (2005). Leadership development in balance: Made/born. Mahwah, NJ7 Lawrence Earlbaum
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Edmondson, A. C. (2018). The Fearless Organization: Creating psychological safety in the workplace for
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Ely, R. J., & Rhode, D. L. (2010). Women and leadership. Handbook of leadership theory and practice,
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Evans, D. (2010), “Aspiring to leadership ... a woman’s world? An example of developments in France”,
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Contribution Table

Introduction Laura

Question 1 Gregory

Question 2 Leo

Question 3 (Paragraph 1 & 2) Emilia

Question 3 (Paragraph 3) Alexandra

Question 4 Laura

Conclusion Laura

Improvements & Fine-tuning Laura, Emilia