The Role of a Firm's Culture in Determining the Ethics of the Organization

The Role of a Firm's Culture in Determining the Ethics of the Organization
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How a company’s leadership and culture influences its business ethics
Just like people do, every business organization has its own unique, inimitable personality. A company’s inimitable personality is its culture. The culture of an organization is usually strongly linked to the organization’s brand image, with each informing and reinforcing the other. The Enron debacle is arguably one of the most momentous corporate collapses in America since the failure of several savings and loans financial institutions in the ‘80s. In this essay, a critical examination of the role of a firm’s culture in determining the ethics of the organization is provided.
McLaughlin (2010) stated that an organizational culture is understood as the practices, attitudes, behaviors, philosophies, and beliefs which define a company. The culture of an organization comprises a system of shared beliefs, values, and suppositions that govern the behavior of staffs in the organization. The shared values strongly influence the people working in the company and dictate the way they act, dress, and carry out their jobs. The culture of an organization influences the everyday experience of staffs and the public perception of an organization (Meisinger, 2012). Organizational culture in the business world is often referred to as corporate culture.
What went wrong at Enron
Enron Corporation was started in the year 1985 during an economic downturn when the then Chief Executive Officer (CEO) of Houston Natural Gas Company, Kenneth Lay, created a merger with Internorth. Jeffry Skilling, former CFO and President of Enron vigorously cultivated a culture which would push limits; his motto was do it better, do it now, do it right (Free, Macintosh & Stein, 2007). Skilling encouraged staff members to be aggressive, innovative, and independent. Staff members were expected to perform to a standard which was always being raised, and what really mattered was adding value. It was essentially an atmosphere of intentionally going against the rules (Madsen & Vance, 2009). A culture that publicly punishes poor performance and values innovation and unchecked ambition could produce great returns within the short run. In the long run, nevertheless, accomplishing extra value by always upping the ante becomes increasingly difficult. Staff members are compelled to stretch the rules more and more until the limits of ethical conduct are easily ignored in the pursuit of the next major success (Meisinger, 2012).
Andrew Fastow and Jeffrey Skilling altered Enron’s corporate culture and business strategy and in the process, these two executives appeared to make the company highly profitable and highly innovative. It is worth mentioning that when shareholders are getting rich and stock is rising, there is actually little inducement for the board of directors as well as the investment community to strongly question the organization’s executives. Enron had several partnerships and Enron’s top leaders had close ties with these partnerships and this brought about the question regarding conflicts of interest. Fastow was ...