Sherron Watkins and Enron-Case Study
About Sherron Watkins
Sherron Watkins (born August 28, 1959) is an American former Vice President of Corporate Development at the Enron Corporation. Watkins was called to testify before committees of the U.S. House of Representatives and Senate at the beginning of 2002, primarily about her warnings to Enron’s then-CEO Kenneth Lay about accounting irregularities in the financial statements.
In August 2001, Watkins alerted Lay of accounting irregularities in financial reports. However, Watkins has been criticized for not reporting the fraud to government authorities and not speaking up publicly sooner about her concerns, as her memo did not reach the public until five months after it was written. Watkins was represented by Houston attorney Philip H. Hilder.
Early life and education
Watkins was born in Tomball, Texas. Watkins holds a Bachelor of Business Administration (with honors) from the University of Texas, where she was a member of Alpha Chi Omega sorority, and a Master in Professional Accounting, also from the McCombs School of Business. Watkins is a Certified Public Accountant.
Watkins began her career in 1982 at Arthur Andersen as an auditor. She spent eight years at Andersen in both the Houston and New York offices. She joined New York-based MG Trade Finance in 1990 to manage their portfolio of commodity-backed finance assets until October 1993.
She joined Enron in 1993, and departed in November 2002. Since then, Watkins has been giving speeches at colleges and management congresses.
In 2004, she released a book about her experiences at Enron and the problems of US corporate culture, Power Failure: The Inside Story of the Collapse of Enron.
Sherron Watkins and Enron-Case Study
Enron is one of the most infamous examples of corporate fraud in U.S. history. The scandal that destroyed the company resulted in approximately $60 billion in lost shareholder value. Sherron Watkins, an officer of the company, discovered the fraud and first went to her boss and mentor, founder and chairperson Ken Lay, to report the suspected accounting and financial irregularities. She was ignored more than once and eventually went to the press with her story. Because she did not go directly to the SEC, Watkins received no whistleblower protection. (The Sarbanes-Oxley Act was not passed until after the Enron scandal. In fact, it was Watkins’s circumstance and Enron’s misdeeds that helped convince Congress to pass the law.)
Now a respected national speaker on the topic of ethics and employees’ responsibility, Watkins talks about how an employee should handle such situations. “When you’re faced with something that really matters, if you’re silent, you’re starting on the wrong path . . . go against the crowd if need be,” she said in a speech to the National Character and Leadership Symposium, (a seminar to instill leadership and moral qualities in young men and women).
LINK TO LEARNING
Visit the National Whistleblower Center website and learn more about some of the individuals discussed in this chapter who became whistleblowers.
Watch this video about one of the most famous whistleblowers, Sherron Watkins, former vice president of Enron to learn more.
talks openly about the risk of being an honest employee, something employees should consider when evaluating what they owe their company, the public, and themselves. “I will never have a job in corporate America again. The minute you speak truth to power and you’re not heard, your career is never the same again.”
Enron’s corporate leaders dealt with the looming crisis by a combination of blaming others and leaving their employees to fend for themselves. According to Watkins, “Within two weeks of me finding this fraud, [Enron president] Jeff Skilling quit. We did feel like we were on a battleship, and things were not going well, and the captain had just taken a helicopter home. The fall of 2001 was just the bleakest time in my life, because everything I thought was secure was no longer secure.”
Watkins was selected as one of three “Persons of the Year 2002″ by Time magazine, alongside two other whistleblowers, Cynthia Cooper of WorldCom and Coleen Rowley of the FBI.
- Did Watkins owe an ethical duty to Enron, to its shareholders, or to the investing public to go public with her suspicions? Explain your answer.
- How big a price is it fair to ask a whistleblowing employee to pay?