Why Virtue Matters
New Horizons in Leadership Studies series
Chapter 2: Moral Capital and Leadership
I. ENRON: PRIDE COMES BEFORE THE FALL At first it seemed as if Enron was just too big, just too important and just too valuable to fail (Walker 2002). It ranked seventh among the world’s largest corporations in the Fortune 500 list, and for six consecutive years since the mid1990s, it was voted ‘America’s Most Innovative Company’. During that period, Enron reported an almost eight-fold increase in sales from $13.3 billion to $100.8 billion, with a market capitalization of $63 billion. Its financial statement in 2000 reported a record-setting net income of $1.3 billion, with recurring earnings per share up by 25 per cent, and a total return to shareholders of nearly 89 per cent. Even as late as 2001, Enron’s board of directors was named the third best board in the US by Chief Executive magazine. Yet on 3 December 2001 the unbelievable became inevitable and Enron became the largest corporation ever to file for bankruptcy in American history (Oppel and Sorkin 2001). Enron and its affiliates sought Chapter 11 court protection for assets worth $49.8 billion and debts of $31.2 billion. The air was heavy with accusations of accounting fraud, insider trading and other securities law violations. Until its untimely demise, Enron was the epitome of a new-economy company, a thinking-outside-the-box, paradigm-shifting, market-making firm (Keller 2002). Founded in 1983, Enron got its big break when state-regulated monopolies in the production, distribution and sale of natural gas and electricity in the US were broken up, and a trading platform...
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