During the summer of 2001, former Enron employee Sherron Watkins found herself in the middle of what became one of the most notorious American corporate scandals in decades, eventually becoming the key whistleblower in the downfall of the energy giant, which declared bankruptcy later that year.
Now a public speaker on the topic of ethics and fraud in the business world, Watkins, who resigned from the company in 2002, is scheduled to present Thursday at the Better Business Bureau’s annual Integrity Awards Luncheon at the Hyatt Regency. Ahead of her visit to Wichita, Watkins answered five questions from Wichita Eagle business reporter Bryan Horwath on the topics of fraud and the business ethics climate in today’s digital age.
Q: Why is integrity important?
A: If you don’t have integrity in business, you’re basically just the mafia. If you don’t have principles and you’re just out to make money, that’s what it comes down to. I tell people that the lesson I learned from my experience with Enron is that the tone at the top is what is most important at a business. Just like children might listen to what parents say, but really watch what they do, that’s how it is with companies. It’s really no different. What is the CEO doing? I think most businesses are run with high integrity and with a set of values, but it’s important to listen to what is talked about at the top.
Q: You found yourself in a precarious position as a vice president at Enron. You came across accounting irregularities that stood out and didn’t seem right to you. Did you think twice about blowing the whistle, knowing that you would have to deal with the blowback?
A: Most fraud is discovered by an employee who moves into a new area within a company and that was the case with me. When I discovered that there were things that weren’t right in July 2001, I thought I could go to(former Enron CEO and chairman) Ken Lay and right the ship. The information I had was fresh to me at the time and I thought the company could be saved, but that’s not what happened.
Q: What is your advice for business students or young people in the business arena today?
A: I tell people two things. First, like I said before, when deciding between companies, pay attention to what the CEOs talk about. If you look at Apple, Steve Jobs was always talking about the iPhone and the iPad — talking about the company’s products. If you look at (former Southwest Airlines CEO) Herb Kelleher, he talked about offering low-priced airfares and sticking it to the big airlines, so he was talking about the service the company provided. With Enron, (former CEO) Jeffrey Skilling was always talking about the stock price — he wasn’t talking about products and services. That’s not where his focus was and that’s very telling. The second thing is that people should be very wary of layers of complexity. Business isn’t that complicated at the end of the day. If there are layers of complicated transactions and lawyers and consultants, that could be a sign that something may not be right. The more complicated things are made to be, the more warned an employee should be.
Q: If an employee finds something amiss and thinks it’s not right, what should they do?
A: Young people should be looking at ethics case studies in college. I’m not just talking about learning about ethics, but going over different cases to get an idea of how these things happen. Employees need a tool kit of what to do when faced with a situation. Otherwise, when people find themselves in an ethical dilemma, what usually happens is they get that deer-in-headlights look. They start to think, ‘My goodness, this can’t be right. Could my boss be doing this?’ They don’t know what to do and then, before they know it, the transaction is closed and their fingerprints are on it. There has to be a plan of attack, you can’t just stay silent. My advice is to protest and put that protest in writing. If a superior asks someone to do something they shouldn’t be doing and the person refuses, they usually won’t be asked to do it again. There might be some grumbling, but typically that employee won’t be fired because those higher up don’t want that information to get out. The work environment might be more difficult, but the silver lining is that the employee doesn’t end up in jail.
Q: In the current digital era where social media rules the day and information is more available than it’s ever been, are we more or less safe when it comes to fraud and corporate improprieties?
A: Being in this digital age gives me a sense of optimism. Wrongdoing gets exposed a little faster and that’s a good thing. There’s a book out called “The Naked Corporation” that talks about the fact that corporate executives need to make sure they have their house in order because of how things can be exposed now. I think that’s true and I think that’s all good, but we also need to make sure we have whistleblower protections in place where people can go to the (Security and Exchange Commission) without having to worry about the repercussions. What is different today than in previous eras is that executives can become very wealthy by taking big risks and eventually bankrupting companies. They can make a lot of money on the way up and still have a lot of that money after they fall. They might have some problems to deal with, but their children and their children’s children will be doing just fine. We need to change that in America.
If you go
What: Better Business Bureau Foundation 2015 Integrity Awards
When: 11:30 a.m. to 1 p.m. Thursday
Where: Hyatt Regency Wichita, 400 W. Waterman
Who: Enron whistleblower Sherron Watkins, keynote speaker
For more information or to attend: Call 800-856-2417 or visit bbbinc.org.