Sherron Watkins Biography
Sherron Watkins is an American former Vice President of Corporate Development at the Enron Corporation who was born on August 28, 1959, Tomball, Texas, the U.S. At the beginning of 2002, Watkins was called to testify before committees of the U.S. House of Representatives and Senate fundamentally about her warnings to Enron’s then-CEO Kenneth Lay about accounting irregularities in the financial statements.
Watkins alerted then-Enron CEO Kenneth Lay of accounting irregularities in financial reports in August 2001. Watkins has however been criticized for not reporting the fraud to government authorities sooner and not speaking up publicly about her concerns, as her memo did not reach the public until five months after it was written. Ms. Watkins was represented by Houston attorney Philip H. Hilder.
Watkins was selected as one of three “Persons of the Year 2002” by Time. (The two other whistleblowers who joined her as “People of the Year” were Cynthia Cooper of WorldCom and Coleen Rowley of the FBI.
Sherron Watkins Education
Watkins was born in Tomball, Texas, USA. She holds a Bachelor of Business Administration (with honors) from the University of Texas, where she was a member of Alpha Chi Omega sorority. Watkins also holds a Masters of Professional Accounting, from the McCombs School of Business. She is also a Certified Public Accountant.
Sherron Watkins Husband
Watkins is married to her husband Richard. The couple has one child. Watkins and her family live in Texas.
Sherron Watkins Age
Watkins was born on August 28, 1959, in Tomball, Texas, U.S. She is the former Vice President of Corporate Development at the Enron Corporation which went under after a gigantic scandal that emanated from accounting and financial fraud. Watkins is 60 years old as of 2019.
Sherron Watkins Enron | Sherron Watkins Memo
Sherron Watkins joined Enron in 1993. In 2001 she noticed irregularities in Enron’s financial statements prompting her to write a memo to the then CEO, Kenneth Lay. Kenneth Lay met her and they discussed the financial situation of the company. Lay denied any wrongdoing and promised to investigate the fraud. In the end, the scandal executives in Enron’s hierarchy including former Ceo Jeff Skilling, Lou Pai, and Kenneth Lay.
In the Congressional and Senate committee hearings that followed, Sherron Watkins testified primarily on the alerts that she gave to Lay. Even though she was majorly hailed as Enron’s whistleblower, she was also widely criticized for neither reporting to the authorities nor making her findings public months before Enron’s bankruptcy. Sherron Watkins departed Enron in November 2002 and has been giving speeches at colleges and management congresses since.
Sherron Watkins Today | Sherron Watkins Now
Since leaving Enron in November 200s, Watkins has been giving speeches at colleges and management congresses. This is due to her high moral standing as she is credited as Enron’s whistleblower, a title that escalated her stature as an ethical professional.
Sherron Watkins Ethics | Awards
In recognition of her outstanding demonstration of ethics in the workplace, Ms. Watkins has received numerous honors, including the Court TV Scales of Justice Award and its Everyday Hero’s Award, the Women Mean Business Award from the Business and Professional Women/USA Organization, and the 2003 Woman of the Year Award by Houston Baptist University.
Glamour Magazine named her one of its 2002 Women of the Year, and Barbara Walters included her as one of the 10 Most Fascinating People of 2002. In 2003, the National Academy of Management presented Ms. Watkins with their Distinguished Executive Award and the Women’s Economic Round Table honored her with the Rolfe Award for Educating the Public about Business and Finance.
Sherron Watkins Book
Sherron Watkins released a book in 2004, about her experiences at Enron and the problems of US corporate culture, Power Failure: The Inside Story of the Collapse of Enron.
Sherron Watkins On Enron Scandal
The Enron debacle was anything but simple, but what were a few of the reasons why it happened? Had management lost its way or was it a ticking time bomb from the beginning?
Sherron Watkins: Many experts summarize “what happened” at Enron using two words, greed and arrogance. An accurate summary, I agree, but it fails to help others learn from Enron’s demise. How did greed and arrogance run amok at Enron? How did a company’s culture breed not only corruption from its own employees but also disreputable behavior from the outside auditors, lawyers, consultants, and lenders?
Enron was at one time the seventh largest company in the United States, based on Total Revenues. It collapsed into bankruptcy without ever reporting a losing quarter. More than $60 billion of shareholder investments became worthless; Enron owed $67 billion to its creditors, 20,000 of them who will or have received on average, 14 to 25 cents on the dollar. Nearly 5,000 employees lost their jobs with no severance pay or medical insurance, and far too many of Enron’s employees also had all their retirement monies invested in Enron, losing not only their jobs but also their retirement savings.
What happened? It was a complete breakdown in moral values. But the scary part is that the breakdown was not done by outright intention but more by small steps in the wrong direction.
Certainly, Enron was not a ticking time bomb from its beginning; in fact, the company started life in 1985 as a merger of two large U.S. regulated gas pipeline companies that had been in existence for decades. One of Enron’s early mission statements was “to become the premier natural gas pipeline company in North America,” a laudable, non-arrogant goal. However, by the mid-90s, Enron had changed that mission statement, first, “to become the world’s first natural gas major” and then in 1995, “to become the world’s leading energy company.” Pay attention to the words a company uses to define itself and its goals. A great deal of arrogance can be seen in the 1995 mission statement. Enron was a large company, but primarily it was still a natural gas company and nowhere near the size of the Exxons and Shells of the energy world. [In 2001, Enron’s mission statement was “to become the world’s leading company.”]
By 1995, the company had been very successful. It had transformed itself from a stodgy regulated pipeline business to a state-of-the art energy trading shop, which eventually handled more than 25 percent of the country’s gas and power transactions. The natural gas market had deregulated and Enron came out on top of the newly created energy trading industry. Folks were fairly cocky at Enron. The company was the top dog in energy trading; competing companies either moved to Houston or at least moved their trading operations to Houston. Enron made the city of Houston the Wall Street of energy trading.
Enron’s ability to evolve and shape the energy markets in the United States earned the company accolades from many sources. Harvard University did a case study; Business Week, Forbes and Fortune routinely covered the company in a favorable light. In fact, Fortune named Enron the most innovative company in America for six years in row, beginning in 1996. Unfortunately, the dark side of innovation is fraud.
Enron’s leaders set the wrong tone, so did Arthur Andersen’s leaders. [Arthur Andersen was Enron’s external auditor.] In the end, both companies put revenues and earnings above all else — the means by which those earnings were generated did not matter. Were laws broken? Yes. Were lives devastated by it? Yes.
You’ve said that Ken Lay would force all Enron employees to book corporate travel through his sister’s travel agency even though it was more expensive than more competent agencies. Can you tell me your thoughts about the importance of a proper “tone at the top”?
Sherron Watkins: What I’ve come to realize is that leadership is tough “ very tough.” All eyes are on you and the slightest erosion in values at the CEO level is magnified in the trenches.
Ken Lay was well known for his charitable giving and his verbal commitment to Enron’s four core values — respect, integrity, communication, and excellence — but he was not quite walking the walk. He always had us use his sister’s travel agency. Trouble was that it was neither low cost nor good service. Domestically, you could manage, but when it came to international travel — that agency was very nearly incompetent. I was stuck in Third World countries where I didn’t speak the language without a hotel room or with an insufficient airline ticket home despite paperwork that indicated otherwise. The incompetence was hard to understand. I would try using a different agency, but after one or two expense reports, I’d get a finger-wagging voice mail or e-mail reminding me that I needed to use Enron’s preferred agency, Travel Agency in the Park; we all called it Travel Agency in the Dark.
Ken Lay was setting the wrong tone. He was in effect letting his managers know that once you get to the executive suite, the company’s assets are there for you to move around to yourself or your family. In some perverse way, Andy Fastow [Enron’s CFO who was originally indicted on 98 criminal counts], could justify his behavior, saying to himself, “Well, my creative off-balance-sheet deals are helping Enron meet its financial statement goals. Why can’t I just take a million here and there for myself as a ‘structuring fee,’ just like Lay has been taking a little Enron money and transferring it to his sister for all these years?”
The CEO of a company must have pristine ethics if there is to be any hope of ethical behavior from the employees.
CFO Andy Fastow operated (and partly owned) LJM partnerships. He used these partnerships to mask hundreds of millions of dollars of losses on Enron investments. How was Fastow able to construct such complicated deceits with the tacit approval of top executives plus accountants and attorneys inside and outside Enron?
Sherron Watkins: That’s an excellent question that many still do not understand, me included. How in the world did a qualified and talented independent board of directors waive Enron’s code of conduct twice, to allow Fastow, to form and run an investment partnership [named LJM] which for the most part did nothing but buy, sell, and hedge assets with Enron?
Enron had allowed Andy Fastow to enter into an unprecedented conflict of interest. Because he was CFO, his fiduciary duties included looking out for the best interests of the company while also becoming the general partner of this investment partnership, LJM, where he raised $500 million of limited partner monies and was charged with maximizing returns for limited partners.
Trouble was that LJM’s business was to do business with Enron. In every transaction Fastow had to choose: Enron or LJM. No human being should be put in such a conflict. Why did Enron’s board allow such a conflict of interest? I must conclude that their judgment was severely clouded by the fees they received as directors. Each director received nearly $350,000 per year for serving on Enron’s board. That amount was double the high end of normal large public company director fees. The board routinely bragged about Enron’s management team. How much of their “Enron can do no wrong” attitude was impacted by the fees they received?
The reason so many Enron executives, and finance, legal, and accounting professionals went along with the questionable — and, in some cases, fraudulent — off-balance-sheet vehicles is multi-faceted. Sometimes, their reasoning was similar to the board’s: their judgment was clouded by high salaries, bonuses, and stock option proceeds. Another cause was diffusion of responsibility; it was Arthur Andersen’s job to opine on complicated accounting structures, or the lawyers’ job to vouch for the legality of certain arrangements, or the board of directors’ role, etc.
Besides money-clouded judgments and the diffusion of responsibility, I often explain how Fastow and his team got away with it by recounting the “Emperor’s New Clothes” fable. In that fable, there is an emperor focused on his appearance not his kingdom — that fits Ken Lay. And there is the swindle — incredibly beautiful cloth but it is impossible to see it if you are stupid or not fit for your office. The swindlers play into people’s insecurities. The emperor sends a minister to check on the progress of the weaving. The minister panics when he doesn’t see any cloth. He knows he’s not stupid, but maybe he’s not fit for his office so he lies and says he sees it. Ditto for the second minister, and so on, until the whole town exclaims about the beautiful new clothes the Emperor is wearing in the parade.
Fastow’s team of accountants, bankers, and lawyers devised very complex structures — so complex, in fact, that when I was first looking into them in July of 2001, it took two hours for a business manager to walk through just one of them with me. When these structures were created, intimidation was used to keep people silent. CEO Jeff Skilling was well known for his accusation that those who didn’t understand Enron or a particular structure were not smart enough to “get it.”
Creating a highly competitive environment where employees did not want to appear weak or unintelligent was one of the root causes of Enron’s problems. Smart people stopped asking questions for fear of looking like they didn’t “get it.”