Sherron Watkins, the former vice president of Enron Corporation and the whistleblower who exposed the corporation in 2001 for its fraudulent accounting practices, visited campus Wednesday and spoke about the intimidating corporate culture that prevents employees from asking questions.
Watkins is known as the primary whistleblower in the Enron collapse. Enron, under the leadership of Ken Lay and in association with an accounting firm called Arthur Andersen, had been falsifying reports on the company by excluding massive amounts of debt from balance sheets. Watkins, in August 2001, delivered an anonymous memo to Ken Lay in which she warned him of the possible issues and that she was worried the company could “implode in a wave of accounting scandals.”
Watkins described Enron as the tale of everyone in a group buying into something that they know is substantively flawed, simply because of a power structure that discourages any doubt.
“That is so much what happened at Enron. [It was] highly complex and, if you spent a lot of time questioning, you would get a very intimidating, high-pressure ‘You’re not going to keep asking questions [unless] you’re too stupid to get this. We’ve hired the sharpest accountants, the sharpest bankers … they’ve signed off on this,’” Watkins said. “So even our board of directors were intimidated into saying ‘ah. What robes!’”
On the panel with Watkins were Brandeis professor of journalism and investigative journalist Alison Bass and director of the Government Accountability Project’s American Whistleblower Tour Dana Gould.
Throughout the event the speakers discussed several key themes about the role of whistleblowers in society, the challenges associated with being a whistleblower and attempts at facilitating more people to have the courage to come clean. Descriptions of the intimidating corporate culture that prevents questions ranged from the extreme of Watkins discussing how six private investigators were digging up any information available to use against her, to the more subtle pressure of moving someone to a worse office space after they attempted to dig into possible corporate malpractice.
Watkins summed up the issue associated with whistleblowing as being a power issue, which makes it necessary to have support behind you.
“You cannot speak truth to power without somehow changing the balance of power and, in the situation with Enron, it would have taken more than just me [as] the lone voice.”
Bass and Gould reasserted the same theme, with Bass focusing on the role of investigative journalists to challenge power structures.
“Just like it takes individuals who speak truth to power, it also takes journalists who are willing to challenge authority and speak truth to power [and] not all journalists [have this mentality]. A lot of business journalists don’t have that ‘speak truth to power’ mentality.” Bass blames this journalistic phenomenon for the failures of media to cover financial issues appropriately.
The panelists also agreed that whistleblowers need more protection. Legislatively, they spoke of the Sarbanes-Oxley Act which came into effect soon after Enron. The act, according to Watkins, had a provision attached to it to protect whistleblowers from discrimination in the workplace. This act was ignored by corporations, however, and even after having the principle reaffirmed as a provision in the Dodd-Frank Act, it insufficiently addressed protection issues.
Gould spoke about the negative cultural connotations associated with whistleblowing that lead many people to try to solve problems within the confines of their corporations without going to the mass media.
“It’s interesting [how] we all have our own social baggage around what the word whistleblower means … they’re disgruntled employees. They’re snitches.”
Both Watkins and Gould agreed that corporations focus on how to silence whistleblowers and have a “shoot the messenger”-type mentality, Watkins said. Gould stated that we need to educate leaders of corporations to try to rid ourselves of this mentality. According to Gould, “the whistleblowers aren’t the problem. The problem is the problem.” Gould also expressed, however, that she believes legal reform is necessary.
In addition, Bass and Watkins spoke about the need to incentivize higher-up employees to stay in corporations for the long-run through regulating or eliminating stock options for employees.
“By getting the stock options,” said Bass, “it makes them more incentivized to go after short-term profits.” In the case of Enron, higher-ups, including CEO Ken Lay, sold off massive amounts of stock prior to the collapse.
In an interview earlier in the afternoon, Watkins spoke about what individuals could do to be more responsible within the confines of a corporation. She advocated for people to investigate small claims, even if they appear to be gossip.
“Listening to the water-cooler talk [could help] … [Or] when you’re working for a big company you have management meetings and they have competitions where you come up with plays and entertaining skits and there was a great study done on what Enron’s skits were really saying about themselves.”
Watkins also addressed the collapse of major financial institutions in 2008.
“[S]ince 2008, the big question has been: ‘Why no prosecutions of the financial scandal problems?’ ‘Why no prosecutions of the executives of Lehman, Merrill, Bear Stearns?’ … If you look at Lehman’s number sheets … they were doing some very similar things [to what] Enron did.”
Speaking specifically about the recent Occupy Wall Street movement, which has come to spread to cities all across the country, Watkins said the issues relate to Enron and the sense that corporations make poor decisions with a wide impact on everyone.
“There is a feeling that the game is rigged and it does come from Wall Street … There’s this sense that the Wall Street lobbyists are setting up an unfair game and we’re all players because we have retirement accounts and 401 K plans … So their unfair game is impacting us.”
After the event, Adam Marx ’14 spoke about the cultural view of whistleblowers that was addressed during the event.
“There is a pejorative [connotation] when you hear the word whistleblower. It has a very negative connotation … It doesn’t make sense that should be a pejorative, negative connotation to it, but there is.”
Aspiring journalist Xinxin Yu ’14 said the speakers accurately portrayed the challenges that are also arising in investigative journalism.
She explained that the notion of how to avoid being attacked and threatened in one’s daily life for telling the truth is an important lesson for journalists.
Gould described whistleblowers as “the first line of defense for the public against wrong-doing.”