Read: Cases from the Real World, page 222. (Access free at https://openstax.org/books/business-ethics/pages/7-5-criticism-of-the-company-and-whistleblowing)
Sherron Watkins and Enron
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.40
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).
Watkins 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.”
Reflection Questions
What would you have done if you were in Sherron’s position?
What factors would contribute to your decision?
How would you weigh the consequences of your decision?
What effect would your decision have on key stakeholders (Enron managers, investors, customers, and your coworkers)?
Critical Thinking
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?
Instructions for all case studies:
Prepare a paper that is longer than one full page. include a header on the paper that includes your name, course section, assignment title and date. Additionally, use headings through out the paper to organize your paper.
At a minimum discuss:
The particulars of the case
The critical issues
The applicable points from the readings that apply
Personal experience with similar issues
Questions brought up in the exercises, and
How you believe most people would act in a similar circumstance.
