FILM ENRON ANALYSIS 5
HowEnron’s Leadership did manage their Stakeholders’Responsibilities according To Clarkson Principles
Thefilm Enron revolves around the fall of Enron Corporation back in theyear 2001(McLean & Elkind, 2013).Enron Corporation was an American energy company which operated inHouston Texas and was among the leading and most innovative energycompanies in the United States. According to Stein& Pinto (2011), Enron’s top management ganged up to enrichtheir personal accounts without caring about their stakeholders’and employees’ welfare. The company’s top management, withSkilling as the CEO, used various methods to misinterpret itsaccounts to hide the government, public, its stakeholders andemployees of the fading finances. This essay aims to discuss howEnron’s leadership did manage their stakeholders’responsibilities according to Clarkson Principles.
ClarksonPrinciples dealing with management of stakeholders comes from forumsthat were held in what is now referred to as the Clarkson Centre forBusiness Ethics & Board Effectiveness for five years from 1993.The first principle states that managers should be aware of theissues pertaining the stakeholders in order to be able to care fortheir interests at the time of making decisions (Donaldson,2002).From the Enron film, it is clear that the corporation’s leadershipdid not adhere to this principle. The Company’ leaders Lay,Fastow, Skilling and Pai made all the decisions without involving oreven putting into considerations the interests of their stakeholders.The leaders were only interested in making money not to benefit thestakeholders, but to enrich themselves.
Thesecond Clarkson principle argues that managers should listen andcommunicate openly with the stakeholders on all the risks facingtheir company. According to Stein& Pinto (2011), Enron`s Chairman, KennethLay, CEO Jeff Skilling and CFO Andrew Fastow were aware of all therisks posed by the company by the trade of speculating oil prices butdid not communicate nor disclose the truth to the stakeholders. Infact, the leaders kept on coming up with strategies to keep onreporting imaginary high profits for the company to manage theirstakeholders’ expectations.
AnotherClarkson principle indicates, there is the need for managers to adoptbehavior and processes which are susceptible to the issues of each oftheir stakeholders. According to Carroll& Buchholtz (2014), one way that managers can effectively managetheir stakeholders is by embracing a culture and establishing a codeof conduct that reflects their concerns and interests. Stein &Pinto (2011) points out one of the primary reasons the Enron’s topofficials failed to manage their stakeholder is due to the lack ofappropriate ethical behaviour and processes. The managers did notcare about their stakeholders` concerns and hence did not implementany cost-effective operations nor embrace ethical modes of conduct.
Accordingto Donaldson (2002), the 4thClarkson principle underpins the importance of managers to recognizethe interrelation of awards and efforts existing between thestakeholders. This principle explains that managers should strive toachieve a reasonable allocation of rewards and burdens of corporateactivities among the stakeholders. Enron’s leaders did notacknowledge the contribution of their stakeholders to the company’ssuccess and hence did not care whether they got any rewards fromcorporate activities. As a matter of a fact, Skilling was onlyfocused on enriching himself with his colleagues without any concernabout the business image of the organization and the rewards thestakeholders would get.
Accordingto Clarkson’s 5thprinciple, managers are supposed to work collectively with allentities both public and private to minimize or avoid all the risksarising from corporate activities and appropriately compensated whenthey cannot be avoided (Donaldson,2002). Enron’s top managers under the leadership of the CEO Skilling didnot involve any entity, not the stakeholders, the employees nor thepublic in minimizing the risks the business was getting exposing toin oil prices speculations. The leaders worked extra hard in cookingthe company`s accounting books to deceive all the entities involved.Even after the company was declared bankrupt, the leaders started ablame game, and none of the stakeholders was compensated for theirloss.
AnotherClarkson principle points out that managers should not involve inissues which may interfere with human rights or result to risks whichare intolerable to relevant stakeholders (Carroll& Buchholtz, 2014). From the film, it is clear that Enron`s topmanagers failed to manage their stakeholders` responsibilitiesbecause they engaged in activities that resulted in risks that wereintolerable not only to the stakeholders but also to the employeesand the public. According to Stein & Pinto (2011), the Enron’sleaders teamed up to take care of their interests and in the long runexposed the company to enormous risks which were irreparable.
Thelast Clarkson principle states that there is the need for managers tobe aware of possible conflicts between their mandates as stakeholdersand their legal as well as moral responsibilities. The managers maythen address the perceived conflicts of interests by the use of opencommunication as well as suitable reporting to ensure stakeholders`interests are met. Under the leadership of Skilling, opencommunication and proper reporting are some issues that were notgiven priority in Enron. During the initial stages when the companystarted reporting imaginary profits, Ken Lay was warned about thehuge risks by some employees. However, Lay ignored and evendiscouraged his employees from appropriate reporting of conflicts.Enron’s leaders did not consider the interests of other relevantstakeholders of the company and hence made no efforts to encourageopen communication to ensure effective conflict resolution.
Fromthe paper, it can be concluded that Enron`s leaders did not followany of the Clarkson`s principles, and this is the main reason theyfailed to manage their stakeholders’ responsibilities and causedthe fall of the big corporation. The leaders only cared aboutenriching their pockets without getting concerned about theirstakeholders’ interests. The film offers various lessons fortoday’s managers about the importance of stakeholder management inensuring the success of any business. If Enron’s managers wouldembrace ethics and act according to the Clarkson’s principles,Enron would still be among the leading energy companies in the UnitedStates with its stakeholders’ interests having been adequately met.
Carroll,A., & Buchholtz, A. (2014). Businessand society: Ethics, sustainability, and stakeholder management.Nelson Education.
Donaldson,T. (2002). The stakeholder revolution and the Clarkson principles.Businessethics quarterly,12(02),107-111.
McLean,B., & Elkind, P. (2013). Thesmartest guys in the room: The amazing rise and scandalous fall ofEnron.Penguin.
Stein,M., & Pinto, J. (2011). The dark side of groups: A “gang atwork” in Enron. Group & Organization Management, 36(6),692-721. doi: 10.1177/105960111142353