Human Behavior in Organizations in the Documentary Film ENRON

“ENRON: The Smartest Guys in the Room” – 2005

“Enron: the Smartest guys in the Room” is a documentary which presents an evaluation of the bankruptcy of the Enron Corporation in 2001 and one of the largest scandals in American history. Enron was a giant corporation in the energy industry based in Houston Texas and had repeatedly earned the title “America’s most innovative company” prior to its downfall. Shortly after its collapse, it was discovered that the company had cleverly used various accounting methods in order to misrepresent its financial data. “Enron: the Smartest guys in the Room” cites the Enron’s fraudulent activities and relates them to the firm’s organizational culture, employee appraisal system, organizational system, leadership style, and organizational behavior in general.

            The documentary begins with the description of Enron as a firm that harbored greed, arrogance, and intolerance and the aforementioned vice as the concrete reasons behind the bankruptcy and the collapse of the company. In essence, the film’s prolog is characterized by a montage of metaphors as the film maker tries to portray the story of the company. Enron is labelled as “the titanic,” “a house of cards,” and “an exercise in smoke and mirrors.” All these phrases are used to open the minds of the audience to the company’s deceitful practices, which were doomed to fail eventually.

The film maker then shifts his attention to the behavioral aspects of Enron Corp’s collapse, including the human and inhumane. The key “smart guys” who are mentioned in the scandal include CEO Jeff Skilling, Chairman Kenneth Lay, and CFO Andrew Fastow. According to the details presented by the documentary, the three facilitated the deregulation of the energy market with a view that the practice would serve as a major means of achieving success. At first, traders of Enron Corp. were engaged in the speculation of oil prices, which was a risky business practice for the company. Nevertheless, the speculation resulted in substantial financial gains and top executives, including the ones mentioned earlier, transferred the huge profits which they had gained to offshore accounts. A few employees expressed concerns and tried to warn Chairman Kenneth Lay about the illicit trading practices, but instead, he discouraged them from viewing speculation as a proscribed activity in business and even went on further to incite the traders to keep profiting the company.

Luck turned down on Enron Corp when two traders got arrested on reckless speculation charges. Because Kenneth Lay had to find another party who could continue making money for his company, he appointed CEO Jeff Skiing. He, together with the new CEO and two of Enron executives Lou Pai and  Lou Pai and Clifford Baxter, worked together to come up with clever tricks that would enable the company to continue acquiring huge amounts of profits (The Economist, 2002). The first scam involved an idea where Enron Corp would become a market for trading natural gas, just like stocks and bonds. The company would then record all revenues acquired from long-term contracts in one year, even though the funds would flow for several years. As the stock continued to rise, the company’s chairman tried to keep the company’s imaginary profits high. He opted to facilitate the purchase of Portland General and involved Enron Corp. in trade deals with other companies such as Blockbuster just to keep the company afloat. Soon, Enron Corp. started operating in California’s deregulated electricity market before some of its employees, investors, and analysts suspected the unusual profit growth as well as repeated articles regarding the success by various authors (Silverstein, 2013). The final outcome was an investigation conducted by Securities Exchange Board which uncovered all the fraudulent activities and the looming downfall of Enron.

The documentary clearly depicts the manifestation of greed, corruption, and unethical practices in the context of human behavior in organizations. Enron Corp’s executives, including the CEO, Chairman, and several other executives, did not question their morality before engaging in fraud and trickery. Instead, they were motivated by motivational gains. On the other hand, the employees and the investors were not aware of the moral intensity of the scandal until it had unfolded. It is quite ironical that the public did not question the continuous profitability of the company because people had entrusted their expectations on the executives without expressing any trace of doubt. Thus, the common human characteristic of greed ended up playing a major role in the materialization of fraud.

Anyone who would be interested in the case of Enron will discover that the company was infected with a dysfunctional organizational culture, a defective organizational system, and unhealthy compensation system. Prior to its down fall, the company had developed a “superior-complex” and aggressive-oriented organizational culture. The employees had been accustomed to their smartness and their positions as “special,” thus they were groomed to do anything that they wanted without any sense of accountability or responsibility (Kinicki & Fugate, 2016). The company’s cult-like leadership style was a significant factor behind the devastating culture of the firm (Tourish & Vatcha, 2005). Enron’s organizational system revolved around its stock prices which prompted the company to become a favorite for Wall Street investors. Lastly, the company’s employee compensation and appraisal system was highly competitive and unhealthy. This prompted the employees to develop an obsession for short-term earnings and the development of unethical behaviors (Kulikk, & Salimath, 2008). Indeed, the documentary portrays the downfall of Enron Corp. as resulting from greed, arrogance, and intolerance.

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