With the introduction of the EU’s Directive, whistleblowers can expect better legal protection. The connotations associated with being a whistleblower have changed over time and the new directive only serves to reinforce that.
Whistleblowing is an essential part of corporate governance as it provides learning opportunities and a chance to improve. We tend to learn better from mistakes so in this blog post we’ll take a look at the story of Sherron Watkins and how her whistleblowing brought down the energy giant Enron.
The Story of Sherron Watkins
Sherron Watkins grew up in the small town of Tomball in Texas. She always had a knack for numbers, resulting in her mother encouraging her to pursue a career in business. Before starting at Enron, Sherron worked for Arthur Andersen first as an intern and then auditor. She then later became the Vice President of MG Trade Finance before starting as a Director at Enron.
Three years into her employment at Enron, in 1996, Sherron began to suspect discrepancies. She considered leaving the company but thought that it might appear as though she was fired. So instead of running away, she decided to stay to save her career.
During her stay, she received a promotion to Vice President of Corporate Development. It wasn’t until the early 2000s, however, when Sherron realised that things were grave at Enron.
Sherron was tasked by Enron’s CFO, Andrew Fastow, with selling assets. But, what Sherron found was a “fraudulent mess”. Following her findings, she wrote an anonymous memo and followed up a few days later with HR, saying it was hers.
She then met with Enron’s CEO and believed the matter would be resolved. What instead followed was a series of investigative articles by the Wall Street Journal and an investigation by the SEC.
Enron committed financial misconduct and misrepresentation when it was presented as being more lucrative than it actually was.
Sherron Watkins played an integral part in the congressional investigations that ensued. It was her whistleblowing that led to the criminal charges laid against the perpetrators of the financial misconduct.
The Importance Of Reporting Financial Malpractices
Financial malpractices don’t occur in a silo. These malpractices have an impact on numerous areas of the business and its stakeholders. They impact employees, investors, and management alike.
The obvious reason why it’s important to report any kind of malpractice is to stop unethical or immoral behaviour. In the same way that we strive to be better people in our personal lives, businesses should strive to uphold good ethics. This will strengthen the brand’s trustworthiness, which is attractive to investors, customers and employees alike.
Unfortunately, by the time Sherron spoke up about these issues, Enron’s situation was terminal. If there had been sufficient protective processes in place, many people’s jobs may have been saved. This shows the importance of calling out malpractices.
Sherron’s story is an enlightening one. Her story highlights the importance of whistleblowing in the workplace as well as whistleblower protection.
This is what the EU Directive aims to achieve as it requires organisations to put sufficient whistleblower policies in place. It’s not easy to come forward as an individual, so having a proper whistleblower channel in place is crucial.
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