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Ethical Review of Leadership and Leadership Management Workshop Analysis

Angelina Spaulding
OGL 200: Introduction to Leadership
College of Letters and Sciences
Arizona State University

Ethical Review of Leadership and Leadership Management Workshop Analysis

Paper 6 Part 1: Unethical Leadership at Enron (Based upon the case study on page 358-359
of your text)
1. How can the theories in this chapter and the theories of leader influence on organizational
culture be used to explain the unethical practices at Enron?
An organizations culture helps to establish the environment in which an organization will
function. The actions and lack of actions from the leaders, and especially from the Chief
Executive Officer (CEO), directly portrays to all stakeholders the ideology of the people leading
an organization (Yukl, 20130). Leaders within organization help to establish the tone of a culture
by setting ethical or unethical expectations through actions and behaviors that emulate the core
mission, values, strategies and beliefs of the organization (Yukl, 2013). In the case study,
Unethical Leadership at Enron, the leaders of the energy business acted against the four theories
of ethical leadership: transforming leadership, servant leader, authentic leadership and spiritual
leadership. The actions of Enrons leaders established an unethical culture within the
organization, which ultimately led to the demise of the company in 2001.
First, it is important to understand the influence that leaders have on the culture of the
organization. Cultural leadership begins with the CEO. The CEO has the most control over the
type of culture that is practiced within a company (Yukl, 2013). A CEO can express cultural
expectations of a business through the use of visionary tactics that promote personal values,
moral and believes. The CEOs actions, statements, lack of action, communication,
commitments, establishment of organizational objectives and through the use of symbols,
slogans and ceremonies can provide subordinates with a clear understanding of the ethical
expectations of an organization (Yukl, 2013). The observational standards that are viewed by the
subordinates should have a direct influence over how ethics are perceived in the organization.

These expectations should trickle down throughout the organization from the CEO, to top
executives, middle and lower level management and eventually infiltrating all departments and
sub departments within the organization.
Having an understanding of how leaders influence culture within an organization, it is
easier to understand how the four theories of ethical leadership influence the type of culture that
is established within an organization. In the case of Enron it is easy to examine how the leaders
of this organization failed to practice the ethical leadership theories within the business. Each
leadership theory has specific characteristic and tactics that are defined as ethical behaviors and
actions that would promote a positive and productive environment for most types of
organizations. When comparing the ethical practices of each theory versus the behaviors of the
top executives at Enron it will show that the cultural environment at Enron was unethical.
The first ethical leadership theory to examine against Enron is the Transforming
leadership theory by Burns describes the need to promote ethical awareness and promote ethical
conflict resolution (Yukl, 2013). The idea of this form of leadership is to promote ethical
practices throughout an organization by having leaders and subordinates hold each other
accountable for personal actions within an organization based on the individual relationships that
evolve between leaders and subordinates (Yukl, 2013). In Enrons case the leaders utilized
abusive tactics that were driven by the need to show stockholders high profits. According to the
case study, each year 15 to 20% of the lowest performing employees would be replaced with
new employees (Yukl, 2013). If an employee questioned any unethical practices of the business
the person would be, fired, reassigned or passed over for a promotion, (Yukl, 2013). The
tactics that the Enron leaders used were manipulative and oriented completely around the need
for the company to show financial success at any cost necessary. These actions by leaders

communicated to the subordinates that it was inappropriate to question the leaders of the
business in any fashion. This type action facilitates no sort of relationship building between
leaders and subordinates, thus not allowing any type of moral standards to be upheld or expected
by either the leader of the subordinate. This ultimately goes against the ethical expectations
outline in the Transforming leadership theory.
The next ethical theory that will be compared to the actions of Enrons leaders is the
theory of Servant Leadership. Servant leaderships primary focus is on servicing the needs of
followers (Yukl, 2013). A servant leader helps followers through, individual development,
empowerment [of subordinates] and collective work that is consistent with the health and longterm welfare of followers, (Yukl, 2013). Enron employees acted completely against the needs
and interest of their followers, and did not follow any of the expectations of servant leadership.
An example of the lack of servant leadership in the company came when executives of the
company encouraged the stockholders and employees to purchase stock in the company even
though the executives were aware of the, financial deceptions and growing losses, in the
company (Yukl, 2013). The leaders of Enron knowingly mislead their followers. Essentially the
leaders of Enron lied to stockholders and subordinates about and did not mention any sort of
financial risks, and ultimately ruining the finances of all who were led by false financial
information. In no way did these actions attended to the needs of the stockholders and
employees of the company. The Enron leaders stood for the exact opposite of well-being of its
followers, and did not practice any form of servant leadership within the company.
Spiritual leadership theory focuses on a leader's ability to encourage the natural
motivation of followers, by creating conditions that increase [a] sense of spiritual meaning in [a
followers] work, (Yukl, 2013). Leaders who practice ethical spiritual leadership help followers

find more meaning in the everyday tasks, and to support a community that is collectively
involved in meaningful activities, (yukl, 2013). The only spiritual influence that the leaders of
Enron could have ever had over the followers of the business was to create a success oriented
culture that prided itself on personal success and financial gain, rather than the success and
greater good for all stakeholders. The work ethic in the company was harsh and expectations to
show high financial results were high, even if that meant creating risky ventures that would only
benefit a falsified bottom line. Those that were aware of the unethical treatment were ostracized
from the company, and in no way does that sort of behavior create an environment that would
promote meaningful work for any subordinate. The only spiritual leadership in this case was
driven by unethical practices that erode the original idea of the spiritual leadership theory.
The final ethical leadership theory that will be compared against Enron is authentic
leadership. Authentic leaderships is, based on positive psychology and psychological theories
of self-regulation. This theory attempts to explain how effective leadership and ethical
leadership work together through the, emphasizes of a leaders words, actions and values,
(Yukl, 2013). Authentic leaders show consistency of values through self-awareness, words and
actions that promote, honesty, altruism, kindness, fairness and accountability, (Yukl, 2013).
The leaders of Enron acted completely opposite of the characteristics that would describe an
authentic leader. The first unethical behavior that proves this to be true is the main act of
falsifying financial records to show inflated profits, which was a dishonest act that mislead
followers and the public. Also, when the Enron leaders created initial blackouts in California
that greatly went against any form of honesty and kindness. All of the stakeholders who were
affected by the blackouts could have had been placed in very compromising conditions. As an
example, a hospital might not have had the power needed to provide required medical treatment

to all patients at the time. Another example could be the food waste that resulted from not being
able to maintain temperatures in restaurants, supermarkets and homes. Not only did Enron create
higher energy prices for the people of California, the financial impact of the blackouts for
business and families from loss products or lost wages is immeasurable.
Unethical Leadership at Enron case shows how the four theories of ethical leadership
were not practiced in the company. The leaders of the company did not practice transforming
leadership by creating toxic relationships between leaders and followers. Servant leadership in
no way could be viewed in this case, as the leaders of the company were more concerned with
financial gain rather than development and empowerment of the company's employees. Spiritual
leadership could not be viewed in any way, expect through the group of executives who found
meaning out of the success-oriented environment. Finally, authentic leadership was not practiced
at Enron. The executives of the company were dishonest, manipulative and practiced very low
integrity. The culture of the company was influenced by a group of leaders that practiced
unethical behaviors that ultimately resulted in the liquidation of the company.
2. What can be done to reduce this type of unethical leadership in the future?
The unethical practices of Enron were unprecedented. The value system of Enrons
leaders were loose, and set up an environment of unethical behavior within the culture of the
company. This unethical leadership resulted in the inflated success of the company, and the
ultimate demise of the organization once this company's practices were made public by the quick
drop in stock market value. The unethical behavior of the leadership trickled down throughout
the organization, which eventually lead to the entire organization being pressured into practicing
unethical behaviors.

The unethical environment that the high-level management leaders created in the
organization was completely avoidable. Yukl (2013) describes a variety of practices that can be
used as suggestions for developing ethical leadership within an organization; which can be done
through the ways that people individual promote ethics within an organization, through the
positive promotion of ethical behaviors within an organization and through the use of programs.
As well, the, cultural value, laws and professional standards, within the nation of the
organization have an influence on ways that organizations conduct business. Practicing ethical
leadership in an organization is possible, but it must come from the installation of ethical
practices throughout the organization.
To help reduce unethical leadership in the organization the organization itself must be set
up for success by the executive team. The executive team has the most control in developing a
culture within an organization that is positive, or a culture that is degrading if unethical practices
are observed within the organization. Leaders need to communicate clear standards of ethical
expectations within the company through the use of speeches or letters that contain ethical
language. The language of the speeches should be focused on ethical imagery, symbols and
metaphors that will help communicate the value system and ethical expectations of the leader
(Yukl, 2013).
Leaders then need to, model ethical behavior in [the leaders] own actions, (Yukl, 2013).
The leader needs to personally practice the ethical standards outlined for rest of the organization
to observe. People will not follow a leader that promotes ethical behavior and then through other
actions contradicts those ideas through behavior that will question the value and morals of the
employees of the organization.

Leaders can dissuade unsavory practices by ensuring that people within the organization,
find fair and ethical ways to resolve problems and conflicts, as well as, opposing unethical
practices in an organization, (Yukl, 2013). Leaders do not need to be the only ones to drive
ethical practices within the organization. To help practice ethical behaviors within the
organization and promoting positive ethical conflict resolution, an organization can establish
programs to help promote the needs of the organization.
Ethical behavior programs within organizations serve two main purposes: strengthening
the internal values of individuals within the organization and enforcing compliance [of] ethical
guidelines and policies, within the organization (Yukl, 2013). Those that help to create and
preserve the ethical expectations of the organization can be found throughout organizations.
Ethical committees can be made up of top executive leaders, middle and lower level managers
and subordinates. A Human Resources department within a large organization can have a sub
department that focuses on the education and communication of ethical expectations of a
business. Groups within organizations vary depending on how the organization, itself, wishes to
promote ethical education in the organization.
Even though each organization may develop their own expectations and practices for
promoting ethical practices there are a few common characteristics of all ethics programs.
Organizations generally develop codes of conduct charters, policies or guidelines that are used to
set an overall standard within the organization (Yukl, 2013). These code of conduct charters
need to be enforced and maintained, and this is generally done through a code of ethics board or
committee. These groups are charged with evaluating possible unethical cases, determining the
result of unethical practices and carrying out, if needed and given the authority to do so,
implementing the needed punishment for any pre-established unethical behavior. These

committees would also monitor possible unethical situations within the organization, and
intervene prior to a situation getting out of control (Yukl, 2013).
The cultural values of a nation, professional standards and the laws of the nation, state or
local government are all influenced by ethics (Yukl, 2013). In the Enron case the laws based on
what these persons did were not yet created. The cultural value of the nation knew that the
actions of this company were unethical, because people in this country believed that practices of
Enron were coercive and manipulative. People understood that there needed to be professional
standards across the board in the nation to deter organizations from conducting them same
villainous act. In the United States federal government in 2002 the Sarbanes-Oxley law
established a federal securities law that required transparent accounting practices to be reported
to the federal government to prevent any practices that would mislead actual finances of an
organization (Sarbanes Oxley, 2005). The Enron case was a major reason that this law was
established in the country. This law was created, because the cultural values and professional
standards that the citizens of this nation expected needed to be affirmed through its nationals own
laws.
Ethical practices within an organization are possible. A leader must establish a positive
culture that promotes ethical behaviors within their respective organization, and promote a value
system through the leaders own behaviors and actions. Organizations can also establish code of
conducts and groups that will help enforce the rules of an organization, to ensure that there is
equal equity in the implementation, education and maintenance of ethical practices within an
organization. It is also the responsibility of all people inside the organization and outside of the
organization to expect ethical practices to take place. Creating a positive environment and

establishing a culture with a high value system will help to maintain an ethical atmosphere
within most organizations.
3. Who was affected, and how, by these practices?
Negative Affects

Positive Affects

These employees invested


personal money into the
company, based on false
information and lost that
investment (Oppel, 2001).
Employees lost Jobs, 401(k),
benefits and pension plans
(Oppel, 2001).

Employees were no longer


in a negative and unethical
work environment.

People Affected
Middle and Low Level
Employees

Upper Management

Investors on the Stock


Exchange

Arthur Anderson and


Employees

Jeff Skilling when to jail


(Wilbanks, 2013).
One executive committed
suicide over the scandal
(Enron, 2002).

The practices of the


company forced the hand of
the Federal government by
creating enhanced securities
and exchanges laws
(Sarbanes Oxley, 2005).

Enron was a publicly traded


company, and had an effect
on the New York Stock
Exchange numbers (Seabury,
2008).

The creation of the laws


helped to protect investors
and ensure that companies
would act more
transparently (Sarbanes
Oxley, 2005).

The association with Enron


and helping in manipulating
records showed negatively
for the company.

Citizens of California
Energy was intentionally
siphoned out of California to

The state no longer needed


to be concern with higher

create blackouts. The same


energy removed from
California, was then sold
back to the state at a higher
price (Yukl, 2013).

energy prices and blackouts.

Part 2: Managers Workshop - Wilson


1. What was the major problem with Wilsons job performance? What were the underlying
causes of this problem?
The major problem with Wilsons job performance is in regards to the low sales volume
within his territory. Omegas expectations set a minimum sales volume of 400 units, and Wilson
is only meeting 310 of those units for this Quarter. In addition, Wilsons days of wholesales
supply within the territory are at a very low 38 days.
Wilson is suffering from a few underlying causes in his job performance. The first
problem is that Wilson admitting views his volunteer work as more satisfying than his work with
Omega. In addition, Wilson has an over inflated perception that his sales tactics are effective.
Some of his sales tactics are effective with a doctors, but other doctors view those tactics as
annoying and a waste of time. Another underlying problem is the relationship that Wilson has
with the wholesale supplier in his territory. The relationship between the two is not strong at all,
and it ultimately effective days of wholesale supply in the field.
2.

How did you attempt to handle Wilsons job performance problems?

Wilson has been performing poorly for a significant period of time. The first attempt I
make to handle Wilsons job performance is to ask him if he feels that his job is important. This
was not a very effective way to begin evaluating possible solutions to Wilsons low job
performance. Wilson just explained that he essential need to wait out the job until he was ready
to retire in a few years, so he and his wife could live a comfortable life in Florida one day. In no
way was this an effective start to help improve Wilsons job performance.

I decided that my next step help improve performance is to accompany Wilson on a few
sales calls. One of the observations that were made is that Wilsons sales tactics are not effective
with all doctors. I also learn that Wilson has budget his time well with doctors and takes to many
breaks. In addition, I observe that Wilson does not push himself at all to meet company
standards. I also learn that Wilson has a poor relationship with one of the two wholesale buyers
who does not like Wilson at all.
I then ask Wilson to prepare a series of effort and performance commitments in light of
the feedback I have provided. Wilson feels insulted by these performance expectations. He feels
like I am essentially treating him like a child. I again review the feedback that I have provided
for Wilson, and explain that I am not trying to humiliate him. I am attempting to build mutual
respect based on results.
Wilson seems to be appreciative of this conversation. He has agreed to lay out specific
commitments to help show that he is willing and able to meet expectations. Then Wilson asks if
I can assist him with the Wholesaler, Alex, who was giving him trouble. I agree to help with his
problems with Alex for a short while as Wilson attempts to realign his performance.
I then schedule a return visit in one month with Wilson to go back over his sales calls and
review his performance again. My return visit automatically showed results through an increase
in the amount of doctor visits that Wilson has conducted. In aidition, Wilson has become better
at managing his time. Wilson also improved his drawn out explanations with the doctors who
were very sensitive over their time. Wilson created an executive summary that outlined
important information for the doctors. Wilson also offered to leave the information, but to be
available if any questions were to arise from the doctor.
Wilson has improved his sales and has improved his wholesale numbers. To help
reestablish a relationship with the Alex, the Wholesaler that was causing Wilson trouble, I work
with both individuals by being available but not fully involved in the strategies that Wilsons uses
to build the relationship back. Wilson had poor work habits and insignificant intensity towards
meeting goals. Through the coaching and monitoring that was conducted Wilson improved his
performance.
3.
Evaluate the overall effectiveness of your management of Wilsons job performance
problems. What did you do well? In what ways could you have improved your management of
Wilson?
My management of Wilson was fair. In this case I did start off my conversation with
Wilson by asking him if his job was still important to him. I felt like that information was
relevant, because I did not want to move forward to help improve Wilsons performance if he felt
that the best place for himself was not with Omega. I wanted to know that he was committed, so
I could in return be just as committed to helping him improve. As I look back on this first

response made towards Wilson, I wonder if it was a judgment of his age more than anything else.
I even followed up by asking if Wilson was considering pursuing early retirement. I would never
had considered that a question that I would ask a younger person.
My third choice towards managing Wilson was to follow him on some sales calls. This
step should have been my first in helping to better understand the underlying performance issues.
The rest of the steps I made following my initial direction were much more effective in
managing Wilsons performance. I felt that through coaching and follow up I was best able to
motivate Wilson to perform better overall.

4.
Which motivation theory (theories) discussed in the Managers Workshop was/were most
applicable in managing Wilson?
The motivation theory that would best used to manage Wilson is the Expectancy theory.
This theory is a collaboration of all the theories of motivation: Direction and Intensity, Need
theory, Learning Theory and Goal Theory. This theory explains how and why people choose a
specific direction when the individual has many different alternatives to choose from, and the
amount intensity that is used to reach the desired target. This theory also examines how a leader
can guide a follower to a desired target and the follower becoming satisfied with the target and
the outcome of the target.
Wilson has the skills to be a good sales person, but the direction and intensity that Wilson
has towards meeting Omega's expectations are weak. Wilson knows that he is expected to meet
the standards of the business and has a knowledgeable background that can greatly benefit his
clients. However, Wilson is having a problem with sales tactics and time management. Through

coaching and reinforcing behavior from the leader in this case Wilson was able to address his
shortcomings.
Wilson evaluated the situation. Wilson considered that is if he utilized the main points
learned from the coaching conversation that he had a probable chance of performing better.
Wilson then considered that if he did perform better that he would have a better chance of having
a more comfortable retirement in the future, because he would have a greater chance of not
losing his job to poor performance. Then Wilson considered that the outcome of his successes
were desirable enough to perform better. This helped Wilson increase his intensity level towards
meeting his targets, which led to Wilson having a feeling of satisfaction.
The Expectancy theory is a motivational theory that would be best used to increase
Wilsons performance. Wilson had a variety of targets to choose from, and did not have any real
direction or intensity to meet the required job performance standards. Through coaching and
reinforcement, Wilson was able to adjust his sales tactics and poor time management, to
becoming a more successful sales representative.

5.
Suppose that you become a manager in the real world and you encounter another
employee who displays the same performance problems that Wilson did in the Managers
Workshop. What did you learn from your management of Wilson in the Managers Workshop
that could help you to manage your employee in the real world more effectively?
The most successful aspect of the Managers Workshop that I would utilize for managing
an employee in the real world with the same performance problems would be the shadowing of
the sales representatives on calls. This is a great way to observe the behaviors of the subordinate.
This will allow a leader to develop a plan of action to help coach through specific concerns.
Shadowing on sales calls gives the leader and subordinate one-on-one time to discuss ways to
help facilitate better job performance. As well, these opportunities provide time to develop the

leader and follower relationship. Shadowing employees on field operations is an effective


method to helping improve a subordinate's job performance.

References
Enron executive commits suicide. (2002, January 25). Retrieved February 22, 2015, from
http://money.cnn.com/2002/01/25/companies/enron_roundup/
Oppel, R. (2001, November 21). Employees' Retirement Plan Is a Victim as Enron Tumbles.
Retrieved February 22, 2015, from
http://www.nytimes.com/2001/11/22/business/employees-retirement-plan-is-a-victim-asenron-tumbles.html
Sarbanes Oxley. (2005). Retrieved February 22, 2015, from http://www.sarbanes-oxley-101.com
Seabury, C. (2008, November 6). Enron: The Fall Of A Wall Street Darling. Retrieved February
22, 2015, from http://www.investopedia.com/articles/stocks/09/enron-collapse.asp
Wilbanks, C. (2013, June 21). Ex-Enron CEO Jeff Skilling to leave prison early. Retrieved
February 22, 2015, from http://www.cbsnews.com/news/ex-enron-ceo-jeff-skilling-toleave-prison-early/
Yukl, G. (2013). Leadership in Organizations (8th ed.). Boston: Prentice Hall.

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