One final example from Enron's "Code of Ethics" is titled "Twenty-Twenty Hindsight" which carries its own irony without delving into its points. Lay writes on page 10 that if any employees' security activities or transactions "become the subject of scrutiny," those transactions will be viewed "after-the-fact with the benefit of hindsight" (Lay, p. 10). And so, the section continues, "...before engaging in any transaction you should carefully consider how regulators and other might view your transaction in hindsight" (Lay, p. 10).
Looking Deeper into Ethical Standards and Conduct
Craig Edward Johnson is the author of the book Meeting the Ethical Challenges of Leadership: Casting Light on Shadow (Johnson, 2008). Anyone even remotely familiar with the Enron mess knows that there were some shadowy activities within the executive ranks at Enron. But Johnson makes a case that everyone has a "shadow side." On page 4 of his book Johnson notes that psychotherapist Carl Jung was the first social scientist to identify the side of the human personality called the "shadow side." Jung was alluding to and studying the subconscious in this context, and looking into both positive element ("creative," and "the desire for achievement") in the subconscious and the negative, or dark element ("greed, fear, and hatred") (Johnson, p. 4). Other psychologists equate the shadow with "destruction," Johnson writes, but most psychologists agree on this point: "If we want to manage or master the dark forces inside us, we must first acknowledge that they exist" (Johnson, p. 4).
Johnson goes to great lengths to examine the shadow side of executives and leaders in a number of instances, including Jim Jones (People's Temple) who led a mass suicide in Ghana a few years ago. But the focus on Enron is particularly effective in terms of a reader attempting to understand what went wrong in the minds of those who committed the illegal and contemptible actions that led to Enron's downslide and eventual demise. The more power we have, Johnson goes on, "...the more likely others are to comply with our wishes" (Johnson, p. 7). The author discusses the "five power bases" in an attempt to explain how power can become corrupted.
Coercive power" is a system based on "penalties or punishments" like salary reductions, suspensions of students in high school or college, "physical force" or "embargoes against national enemies" (Johnson, p. 7). "Reward power" comes in the form of praise, cooperation, trust, "bonuses, health insurance" or grades, while "legitimate power" comes with the position, not the person (examples include judges, cops, parents and supervisors) (Johnson, p. 7). "Expert power" is based on the knowledge of the individual, the skill level, certification and education of the person, Johnson continues on page 7. And the fifth kind of power is "referent (role model) power," which rests "on the admiration one person has for another" (Johnson, p. 7). Johnson explains that leaders most often draw on more than one power source, and in the case of Enron one can certainly deduce that "coercive power" and "reward power" played significant roles.
Meantime, Johnson (p. 29) asserts that Enron's executives "cast shadows" in several ways, in terms of ethics. Those executives certainly exhibited an "abuse of power," and the story of their abuse of ethics can be capsulated through the activities of Jeffrey Skilling (Lay's replacement who didn't stay long). Skilling "wielded power ruthlessly," Johnson explains. Skilling frequently intimidated subordinates while Lay simply "demoted" underlings who disagreed with him. Another shadow cast by Enron leaders vis-a-vis ethics was through "excess privilege"; the executives simply spent wildly with money that truthfully did not belong to them. Lay told a friend, "I don't want to be rich; I want to be world-class rich" (Johnson, p. 29). Even as the 401K accounts of their employees were being "wiped out" Lay and his colleagues were unloading their shares and profiting by multiple millions of dollars.
A third "shadow" that was cast by Enron executives was "mismanaged information" - which Johnson (p. 29) says is a process that deceived the public and the board members. They set up partnerships "off-the-books" which is an illegal way to manage corporate books. A fourth shadow mentioned by Johnson was "Inconsistent Treatment of Internal and External Constituencies"; this breach of the company's own code of ethics amounted to Lay and his executive colleagues giving five hundred Enron officials "retention bonuses" of over $55 million while lower-level employees were being laid off with tiny little severance paychecks (Johnson, p....
Executive Stock Option Plans "If the company does not do better than its competitors, but the stock market goes up, executives do very well from their stock options. This makes no sense." Discuss viewpoint. Can you think of alternatives to the usual executive option plan that take the viewpoint into account? Executive stock options are performance-based incentive plans that became popular in the 1950s and 1960s. They declined due to the stock
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