Surviving at the Expense of Morality

As I flipped through the first few chapters of Scott and Davis’ Organizations and Organizing, my eyes stopped on a quote by Barnard in the natural systems chapter.

“Finally it should be noted that, once established, organizations change their unifying purposes.  They tend to perpetuate themselves; and in the effort to survive may change the reasons for existence” (pg. 89)

Scott and Davis follow up Barnard’s claim with an interpretation that reads, “The necessity of survival can override the morality of purpose” (pg. 72).  I never would have realized the value of this perspective in regards to analyzing Enron if I had not recently read chapters eleven through thirteen in The Smartest Guys in the Room.  These three chapters focused primarily on the off-balance sheet magic that Fastow performed as CFO of Enron.  He and his Global Finance team set up many special interest entities and spinoffs in order to disguise debt as equity.  Fastow could borrow money from financial institutions and keep it off the Enron balance sheets on the grounds that it was invested in these other entities. He also engaged in securitization by selling generously estimated future cash flows of assets in a debt return form.  This way Enron could immediately reap the return and the sale revenue.

At the time of bankruptcy, these off-balance sheet debts accumulated to about $2 billion.  Enron had continually borrowed from the future and disguised the debt as equity in order to dress up its financial statements at years end.  Ken Lay continually set earnings goals that were far out of reach. This meant that Fastow had to continually work his accounting magic to perpetuate Enron as the fastest growing energy company around.  He wanted Enron to survive as the largest and most powerful organization in the world, which quickly overcame its original purpose as a natural gas provider.

Enron abandoned its function as an energy provider and became a giant organization focused on sales.  When meeting about the utility spinoff EES, Lay proclaimed, “This stuff sells. Now we have to actually get out there and do something for the customers” (184).  It was no longer about providing customers with energy solutions.  The only unifying purpose at Enron became the desire for power and money.

So for my paper topic I want to build upon the connection between Enron’s actions and the natural systems perspective towards organizations.  I also have some thoughts about tying in goal complexity and the misuse of power.  Barnard should be a good author to start with, but I’d also like to look into using Philip Selznick and other authors as I come across them in my research.  Organizations and Organizing and The Smartest Guys in the Room should provide a great deal of insight into my initial argument, but there are plenty of other reliable sources to be found.  First I turned to Google Scholar and found Barnard’s book The Functions of the Executive, which was cited by Scott and Davis as well as 6,940 other sources.  I also found a collection of essays about Barnard’s theories that was cited by Scott and Davis and 183 other sources called Organization Theory: From Chester Barnard to the Present and Beyond.  Using the Bucknell database, I was also able to identify several other publications that discuss Barnard, Selznick, and goal complexity in organizations.

I’ve still got plenty of research left to do in order to build my argument, but I still want to pursue Enron’s sacrificing morality for the sake of survival and power.  I would love to hear any criticisms or suggestions towards this idea as peer advice is a valuable resource that I have not investigated yet.  Also, is it worth tying in the misuse of power, or should I just focus on how Enron changed in pursuit of power and survival?

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One Response

  1. […] Surviving at the Expense of Morality […]

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