Business Papers on The Decline and Fall of Enron

The decline and fall of Enron can be explained using the five fabrications that have been highlighted in the article “Beyond Selfishness” by Mintzberg et al. The fabrications include the economic man, shareholder value, heroic leadership, lean and mean organization, and the rising tide of prosperity (Mintzberg et al. 1). These are economic fabrications that arose from the second world war to the present, leading to better performance in economics, but a degradation in the social structure.

Using the fabrication of the economic man, Enron was willing to sacrifice everything else inclusive of reputation and morality in order to earn high yields from the investments. This, in effect, attracted many investors who were interested in get a part of the profits that this firm was garnering from the market (Mintzberg et al. 3). What they did not understand was that this profitability was for the most part artificial. It is most likely that if the firm had been truthful about the market and the yields, then most investors would not have considered putting their money in it. The practices of the investors and the management of the firm were etched in selfishness with each trying to earn maximum benefits from the relationship, leading to the collapse of the corporation.

The original intent of the creation of the corporations was to serve the society. However, this has changed and the corporations are now intent on benefiting the shareholders at the expense of the other stakeholders. This is the premise of the second fabrication which states that the corporations exist to maximize the shareholder value (Mintzberg et al. 5). Enron was hellbent on impressing the shareholders to the extent of cooking the books of accounts in order to give them the impression of better performance and increased value. The top management in the process was rewarded with bonuses. The responsibility of the firm to the rest of the shareholders and the society was not considered. This inevitably led to the decline of the firm.

The third fabrication is that the corporations require heroic leaders. These CEOs are given larger than life reputations and the success of the firm is attributed solely to them. This is despite the success of a firm resulting from the efforts of both the employees and management (Mintzberg et al. 5). In the case of Enron, the senior management was given hefty bonuses and benefits as a result of the impressive performance that the firm seemed to make. Furthermore, the leaders of these corporations are rarely punished in the event of the corporation not performing well. Either way, they stand to benefit. The same was observed with Enron.

The fourth fabrication according to the article is that a firm should be lean and mean to be effective. This often means that the firm has to lay off some worker and take up other cost saving measures in restructuring the firm for bigger profits (Mintzberg et al. 6). This was also implemented by Enron sometimes before its decline, and it must have made the remaining employees become less loyal or motivated in their work. The laying off of a portion of the workforce often results in increased workload for the ones that remains fostering resentment in the process.

The last fabrication is that the rising tide of prosperity lifts all boats. This is the assumption that a robust economy or performance of the corporations results in all the persons in the society benefiting (Mintzberg et al. 7). This, however, is not the case, as it is the leadership of the corporation and the shareholders that tend to benefit at the expense of the workers. The short-lived glory that Enron corporation enjoyed resulted in gains of a few and losses for many including the workers. In short, the decline and fall of Enron was in line with the inefficiencies caused by the fabrications in the economy.



Work Cited

Mintzberg, Henry, Robert Simons, and Kunal Basu. “Beyond Selfishness.” MIT Sloan Management Review 44.1 (2002): 67-74. ProQuest. Web. 8 Apr. 2018.