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Speaker 1: Hey, and welcome back to another episode.

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And have you ever wondered how some of the world's most prominent companies fell from grace.

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How executives, while staying within the confines of the law, made decisions so ethically dubious

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that they shattered the reputations, crippled industries, and changed the course of business history.

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Well, today, we're gonna dive deep into the murky waters of what I call awful but lawful leadership,

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Where the choices were legal, but morally questionable, and the fallout was nothing but short of catastrophic.

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From the deceitful depths of Enron's financial scandal, we're gonna take a look at just a peek

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behind the curtain about what goes on at senior levels in industry and in different organizations,

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and how people can make legal calls that may be questionable.

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This is Tim Staton with Tim stating the obvious.

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What is this podcast about? It's simple.

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You are entitled to great leadership everywhere you go, whether it's your church, whether it's

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to work, whether it's at your house, you are entitled to great leadership.

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And so in this podcast, we take leadership principles and theories and turn them into everyday relatable and usable advice.

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Speaker 2: And a quick disclaimer. This show, process or service by trademark, trademark manufacturer,

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otherwise, does not necessarily constitute and implied endorsement of anyone that I employed

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Speaker 1: So this episode has been in the making for quite some time now.

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And all all too often, I hear stories and complaints and gripes from people about, oh, my leadership is doing questionable things.

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My leadership is being immoral. My leadership is doing x, y, and z.

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And then I go take a look at everything, and then it comes back that, no, no. It's legal. They can do that.

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It's not convenient for you, but it's well within the confines of what they're allowed to do.

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They're left on the right limits. And you just happen to be on the receiving end of what they are allowed to do and not allowed to do.

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And if you look at the situations in which they occur, you know, the perception could be is yes.

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It is perceivably immoral and wrong about how the actions of are being treated towards you,

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or how you perceive the situation to go down.

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And all too often, you look at you know, I find myself looking at situations, and I'm like scratching my head.

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I'm like, well, this is legal. I mean, it's okay.

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It's within the regulatory guidance of being able to do it.

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It's within the policies of being able to be done, but it just doesn't feel right.

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There's something more here to it that doesn't feel right.

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And then, when you peel back the onion on it, you're like, okay.

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There were ulterior motives on how this went down and on how these things happened.

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So because I can't share any real world, examples from my from my job, I am going to share a case study.

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And from that case study, we can glean a lot of the same insights that are really applicable

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to every single organization that you can think of.

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Every single organization that any of you listening to this, if you if you've look at your organization,

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you could probably pick something out and go, yep. That applies. Or, hey.

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Actually, we do a really good job trying to combat against that.

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And I I wanted to start with this little story, that because I was I was scrolling through Staton,

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and I saw a video about there was a guy, he worked in HR, and he goes, you know, there was this

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AI job posting that they were told to do for their company, and 1 of the prerequisites was 8 years of experience.

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Well, at the time that he was posting this job, it was impossible to have 8 years of AI experience.

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You could have had like 2 or 3, but AI didn't exist to that point yet.

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So the fact that you're saying, why didn't you get someone with 8 years of AI experience just wasn't gonna happen.

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So he went to his leadership and he said, hey. Look.

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He's like, I I'm I think there's a mistake here. You said 8 years of experience.

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There's no way anyone's gonna have 8 years of experience.

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We might need to change this. And they said, no. 8 years of experience is what we're looking for.

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And really, what we're looking for is people who are willing to do anything to get the job done.

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And he goes, well, anything, you mean, like, lie on their job application, which is kind of wrong and immoral?

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And they're like, that's not for you to worry about. What it is for you to worry about for you to hire the best people with 8 years of experience according to their resume.

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And it didn't sit right with Tim because he because he said, yeah, I you're asking me to do something that's wrong.

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You're asking me to knowingly post something that people cannot meet the requirement on.

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And 2, you're asking me to accept the wrongness of an application.

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Because I I just have a hard time accepting that.

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So eventually, they posted the job. They hired somebody.

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But then this HR manager, he quit his job because he was, I can no longer work for this organization.

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Because if they're willing to hire somebody who was willing to do anything to including a lie

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to get a hand and to get a job and to get things done, that's not a organization that they wanted to be part of. So then they quit.

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And I want you to think about it for a second. How many times are you put and asked to do compromising things in your position at your workplace?

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And inherently, you think, well, that's that's probably not right. It's probably wrong.

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And then you do some digging, and you're like, no.

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Actually, what they're asking me to do, I should I can do.

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But I'm just gonna have you ask this question as we go throughout this analysis.

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Just because you can do it, should you do it?

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There's a difference between something you can and you should do.

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This will definitely flush all this out as we go through.

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So the case today we're gonna do is Imran, and and we kind of talked about that upfront.

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But Imran was a major, American energy company.

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They collapsed due to widespread corporate fraud.

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The unethical leadership of the executives of this organization were there because they engaged

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in complex accounting fraud to hide the debts and inflate profits.

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Basically, prove to the public, no. No. No.

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We're doing really, really good. We're hiding our debt, and we have more profit than we have. So invest in us.

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We'll get you the best energy that's out there, when in fact, that really wasn't the case.

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So that was the bottom line underlying unethical issue.

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The lawful but awful part here is that while some of the initial financial maneuvers were technically

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legal, they were highly unethical and misleading to investors and employees.

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And the scandal led to Enron's bankruptcy, massive job losses, and the dissolvent of Arthur

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Andersen, 1 of the largest audit firms at the time.

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So the fallout of this was huge. And the Enron scandal is a prime example of how ethical dilemmas can erode trust within an organization and within the public.

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The financial misrepresentation done by executive and executives and senior management made

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employees feel deceived as they discovered the company's true financial health was far worse than they reported.

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And when this type of trust is broken, it can almost never be rebuilt.

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So when we talk about rebuilding trust and having a Staton that works of trust for for folks,

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we need to talk about whistleblower protection. Right?

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So in this case, there is this whistleblower retaliation on behalf of the employees unethical

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practices, like Sherrin Watkins, and they faced retaliation, and they were ostracized.

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You know, and this type of behavior is wrong because it leads to a culture of fear and silence,

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where employees felt unsafe to report wrongdoing, and it eroded their trust in the company's commitment to ethical behavior.

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And what we're talking about here is, in an organization, you need a framework where people

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can talk outside of their normal chains, outside of their normal silos and hierarchies and departments

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in which they work in, to bring to somebody some questions or issues if they think there's something

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wrong, so the organization doesn't have to suffer because of a decision that a leader somewhere, some somehow is making.

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And in this case, when somebody did do that, like Sheron Watkins, they actually were ostracized at work. They were ousted.

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They were had retaliation against them, and that sent a clear signal to everybody else. Don't speak up.

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Don't do the right thing. You could have your job on the line for this.

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And if you don't lose your job, we're gonna make your life a living hell.

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So you probably don't wanna do that, and that erodes away the trust within the company.

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And it erodes though away the commitment from the employee to the employer because now there's no trust.

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And that's critically important in any organization, especially when you're working, with public

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entities and private entities and making sure that everybody has an above board trust level.

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Because if nobody trusts you, nobody's gonna wanna work with you.

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So another area that may look familiar to you to people is that there's this issue of the leadership and its hypocrisy.

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You have top executives that are talking about a culture of high ethical standards publicly

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while while privately doing shady stuff.

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And I'm gonna tell you that eventually, the truth will come out and everyone will know.

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And the disparity of do as I say and not as I do is going to bite you in the butt and erode a trust.

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So don't be that guy. Don't be that leader out there that preaches his method ethical, moral high ground, and then

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does shady stuff on the side. Because I can tell you from experience, as people do this, your unethical stuff will then come

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to light and discredit everything that you have said.

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So again, actions must match your words and vice versa.

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Am I saying you have to be perfect? No.

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We are all human beings and we all make mistakes.

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And sometimes, we step on it royally and we step on it royally big, and we need to own up to it. Right?

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And we need to apologize and move on. Sometimes, we can't recover from it, and we need to change organizations.

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Sometimes, we can't, and we can reestablish trust and move on.

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But if you're being a leader that's hypocritical, no 1 is gonna take you at face value and people

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are not gonna wanna work with you, which then further erodes that employee engagement and that trust.

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So then when we take a look at their sales practices and how that became unethical. Right?

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So Enron was engaged in aggressive and unethical sales tactics, including manipulating energy

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market markets, like the California electricity crisis.

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Then we have employees who are aware of these practice and felt morally compromised and questioned

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the integrity of their work and work environment, and that led to a loss of loyalty and trust in the company's vision.

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Again, another break of trust.

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So when you have several breaks of trust like that, and then when you have employees and you're

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asking them to do something, and it causes them to question their moral integrity in their moral

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environment, that's where you run the risk of causing moral injury.

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You see, moral injury is when an individual experiences profound psychological distress due

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to actions or the lack of actions, which violate their deeply held moral and ethical beliefs.

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This concept is often talked about in military personnel.

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You know, when you ask people to do bad things in bad situations because that's what is required,

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It could cause a moral injury in that person.

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But it can also be applied to civilians in various professions and situations.

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So here are the key elements of moral injury.

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If you've never heard of this, it is it's happens all the time.

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Some people call it transfer of trauma, which is also true, but this is also, the moral injury that happens to people.

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And so the the core of it is of these elements for moral injury is a violation of your moral

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beliefs, psychological distress, and the long term impact that it has on that individual that causes moral injury.

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So in this situation with the unethical sales practices, people were constantly going, ah, I feel compromised.

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I'm violating my moral beliefs. And then they have this psychological battle about, I need to keep my job. No.

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I need to do the right thing. But I need to pay my bills.

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But I also need to make sure that I'm doing the right thing because I gotta look at myself in the mirror.

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I'm the 1 that's gotta be accountable for my own actions at the end of the day, and there's

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this struggle that happens in in there.

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Then you have the long term impact that happens on these individuals.

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And in this case, you have massive job layoffs.

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You have a whole auditing firm that got broken apart.

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Then you have everyone losing their jobs on top of that.

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Huge huge long term impact on the psychological effect.

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So you can take a look at the unethical sales practices that Enron engaged in and how people felt about it.

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So leaders, you need to listen up. Don't do this to your people.

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You may be okay with doing shady and unethical practice practices yourself.

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However, most likely, your people are not, and the long term impact of your issues will hurt

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people more than just suffering through the issue at hand or the opportunity at hand that you're

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trying to get ahead of, and working hard to find the right solution, the correct solution.

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And lastly, you know, when we talk about long term impact, there were layoffs and pension losses that happened.

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You know, as Enron's financial situation deteriorated and the whole company started to unravel,

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many employees were laid off. And their retirements and savings heavily invested in Enron stock were wiped out.

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And the handling of layoffs and the devastation of employee pensions while executives were cashing

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out their shares, you know, heightened, highlighted the lack of regards for the employees futures,

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and it further eroded trust in the public and in the and in the people.

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When you have your senior leadership taking their stocks and selling it off, and making a killing,

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and making money, and patting it on the side, because you know this organization's going down.

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You're just trying to take everything you can with you before it goes under, and you're just

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gonna make sure that you're okay, and you forget about everybody else on your team. That is highly unethical. Happens all the time.

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Just look at your organizations and look at your leadership, and see what they are doing, and see where they're going.

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Often, you'll find this in mergers of banks. Right?

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So 2 2 banks will merge. 1 1 business and bank is gonna lose a name.

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The other one's gonna inherit the goodwill and faith of that name because of the merger.

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In that process, if you look at the stocks, you got the senior executives and you got senior

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folks selling their stocks off. Getting the cash for it, because they know they're on the chopping block.

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So if I go, I gotta get my pension, my severance package, and I'm taking my stocks with me.

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I'm not taking it down. Further tanking the company as it goes down.

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So I want you to think about this. How often can you find in your organization that these things happen? They happen daily.

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They happen all the time. You know?

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And the things that people do, they may be lawful. Right?

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We may be legally be able to do something.

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But just because you legally should be able to do something and could be able to do something,

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does not mean you should. Just because you can, doesn't mean you should.

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Especially, if you look at the long term impact and the ethical impact of your decisions.

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Oftentimes, I am convinced people look at it in the what's in it for me perspective.

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I'm taking care of me first. Leaders, it ain't about us. It ain't about you.

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It's about your team and your people.

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But I'm also a firm believer that as people do things, and there may be questionable actions

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along the way that are lawful but awful, there are a variety of reasons why people do things,

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and they do what they do. And I am a firm believer that nobody wakes up in the morning and says, how can I screw up today?

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How can I be the worst possible human being on the face of the earth?

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I don't think that people wake up that way.

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I also heavily believe that executives at Enron didn't wake up 1 day and say, hey, How can I

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make the most unethical company ever to go down in history and make money in the process?

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I don't think that people woke up and came to that conclusion.

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It happened over the time with smaller legal unethical dilemmas that everyone allowed to happen,

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and people didn't hold each other accountable, and nobody spoke out about it.

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If someone did speak out about it, you know they hammered that nail back in place and made an

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example out of that person, so nobody else spoke up.

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Creating a less than optimal work environment.

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So how can we set up a framework to guard against being lawful but awful leaders? Right?

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And I'm glad that you asked that question, because the first thing that we can do we can do 2 things.

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The first thing we can do as senior leaders of any organization is surround ourselves with trusted reprovers.

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Now, if you don't know what a trusted reprover is, this is a 1 person or a team of people who

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are capable and willing to tell you what you need to hear to include the truth even when you don't wanna hear it.

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It's the people who can hear who can tell the leadership, no.

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You probably should not do that. No.

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You should not do this, and no.

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You should not do that. Whatever it is. Yes.

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I know you legally can, but here's why you should not do what you're doing.

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Because the perception and the ethical dilemmas that go with it is killing the organization from within.

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And if we're gonna have a healthier organization, we need to have trust in a healthier work environment. Right?

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So that's like the first thing that we can do, is make sure that we surround ourselves with

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people who are going to be reprovers, who are going to tell us when we're going down a path

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that's probably wrong, ethically and morally. However, legally okay.

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And the second thing we can do is listen and respond.

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If you are a leader and you are at the executive level, you need to listen to the people around

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you that have been hired to help the Tim, to help you make informed decisions.

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That's what you need to do. You need to listen and trust.

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Because if we're not listening to that and then deciding to make the hard choice, you know,

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again, we go back to just because I can, doesn't mean I should.

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Just because I can do something, should I do that thing is a different story.

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So as we take a look at lawful but awful, and you look at your own organizations, I'd really

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like to hear, from your stories. You know, please don't be too specific, but general generalities. Right?

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We can all draw generalities from things and applicable.

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You know, I used Enron as an example for this episode because the the things that happened throughout

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this case study happen every single day in every single organization.

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The only reason why it hasn't blown up to national news level or worldwide loo news level or

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local news level is because it hasn't reached that boiling point of causing an issue in somebody else.

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But I would ask yourself, are you or your organization close to that boiling point?

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And can you come back and turn that heat down so you don't boil over, so you don't step on it

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big and make a bad legacy and reputation for yourself and for your organization?

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Because that's what it's about. Leaders leave great legacies and great organizations behind, not shambles.

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And it starts with lawful, but awful, and should I versus I can.

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So just wanted to think on that. I want you to think with that for a little bit.

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So as always, I wanna thank you for stopping by and listening to this episode, and I really hope you enjoyed it.

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Before I go, if I could ask a question, a favor of you if I could, if you could please share

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this episode with 1 or 2 other people who might like this topic.

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those bells, whistles, icons, follows, you name it.

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So that way you know when we have a new episode that's released.

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And if you got some value out of this, please leave a comment or a review so we can help spread

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the show with other people who like the topics of the show, but may not have found it yet.

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So your input and your feedback and engaging together really helps, create the community so

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that other people can can get, something else out of this as well.

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Again, thanks for stopping by. I'm Tim Staton, Dayton the obvious.