Former Enron vice president Sherron Watkins on the Enron collapse

Abstract

Introduction to the address by Academy President Jone L. Pearce It is my pleasure to introduce Sherron Watkins, the Academy of Management's 2003 Distinguished Executive Speaker. By now, her story as the former vice president of Enron Corporation who tried to bring what she called “an elaborate accounting hoax” to the attention of Enron's chief executive officer is well known. In August 2001, responding to his invitation to employees to put any concerns in a comment box, she did so. When he did not address her explosive charges at a subsequent company-wide meeting, she sought a face-to-face meeting with him. A month later the CEO announced to employees that “our financial liquidity has never been stronger,” while exercising his own $1.5 billion in stock options, just ahead of the company's announcement of a $618 million quarterly loss. When United States Congressional investigators uncovered her letter buried in boxes of documents, they brought Ms. Watkins before the United States Senate in February 2002 to testify about her warnings. Her articulate, detailed accounts rocked the foundations of the corporate world and the accounting profession worldwide, with consequences still playing themselves out. Ms. Watkins joined Enron in late 1993, initially managing Enron's $1 billion-plus portfolio of energy-related investments held in Enron's now-infamous investment vehicles. Later at Enron she moved to the international group focusing on mergers and acquisitions around the world, then to its broadband unit, and finally returned to investment-vehicles portfolio management in June 2001 where she worked until leaving Enron in November 2002. Before Enron she was a portfolio manager with MG Trade Finance Corporation and an auditor with Arthur Anderson. Sherron has just completed a co-authored book, Power Failure: The Inside Story of the Collapse of Enron (New York: Doubleday, 2003). Ms. Watkins is a particularly appropriate executive for the Academy to honor now. First, her courage and integrity are extraordinary. As the Financial Times wrote on February 27, 2003, “To her champions, the letter was a principled act, one particularly risky for a female middle manager in a male-dominated office. What she did took courage, says Philip Hilder, her lawyer, and she did it because it was the right thing to do.” I am pleased that the Academy of Management can join the many others in lauding this courage. We join, among others, Time Magazine, who named Ms. Watkins, along with Coleen Rowley of the United States' Federal Bureau of Investigation and Cynthia Cooper of WorldCom, as their 2002 Persons of the Year for being “people who did right just by doing their jobs rightly.” Just the names of a few of the awards she has received will give you a flavor of the wide admiration she has engendered: the Scales of Justice Award, Everyday Hero's Award, Women Mean Business Award, and she has been named Woman of the Year by many, many groups. She is an extraordinary model of courage and integrity in management. Finally, there is another reason why I am pleased that the Academy of Management could honor her this year. She is a middle manager, when our awards usually have gone to chief executives. This is important. She serves as a reminder to all of us that organizations are not run solely by their chief executives, but also by the thousands of managers and professionals who make the millions of daily decisions it takes to make an organization. For too long, we have neglected middle managers. These are the people who know what is really going on and who often persevere to keep organizations operating in the adverse environments brought on by chief executives' mergers, buy-outs, spin-offs and re-organizations. Too often we have just reflected our society's “cult of the CEO.” This bias leads too many to dismiss and devalue the critical managerial work done by those not at the apex of the hierarchy, those doing that critical work which the vast majority of our students will be doing. Ms. Watkins' principled actions serve to remind us that these managers and professionals can make history and are ignored at everyone's peril.