Management Control Practice and Culture at Enron: The Untold Story

Abstract

At the time of its demise in 2001, the Enron Corporation could boast of its comprehensive, state-of-the-art management control and governance systems. Yet these controls were rendered ineffective in the company's last few years. This paper identifies the radical change in Enron's corporate culture that took place from the Lay-Kinder era (1986-1996) to the Lay-Skilling era (1997-2001). It argues that this was a major cause of neutralizing these controls, which in turn proved to be a major factor in Enron's fall into bankruptcy. The paper draws on Schein's (1993; 1996; 2004) framework of cultural practice to develop our analysis. Thus, it supports Simon's (1990; 1995) urging to more meaningfully include corporate culture in management control research studies. The paper contributes to the literature by drawing attention to the rich but untold story of Enron's governance and control and also extends the research linking corporate culture and control systems.

Keywords: Enron, Management control systems, Organizational culture, Enculturation, Jeff Skilling

JEL Classification: M40, M41, M46, G34, Z10