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Enron and its Employees
Heather Hails
Academic affiliation: Oklahoma State University
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The purpose of this paper is to define whistle-blowing and how it is used in today's corporate world, especially within the context of Enron. Using the arguments of several scholars, this paper will also address how Enron's employees, and the company as a whole, were affected by the scandal. The scandal at Enron was brought to light through Sherron Watkins, an accountant for the company. She blew the whistle on Enron's improper accounting. Many wonder why she chose to expose Enron's wrong-doing and exactly what whistle-blowing entails. According to Janet P. Near and Marcia P. Miceli, whistle-blowing can be defined as disclosing wrongdoing within a company to people who can fix the problem. They add as a stipulation that whistle-blowing cannot be considered effective unless "the questionable or wrongful practice (or omission) is terminated at least partly because of whistle-blowing and within a reasonable time frame" (Near and Miceli 681). Unless there is a drastic change implemented within a company as a result of whistle-blowing, it is not a profitable venture for anyone involved. In order to discover how effective whistle-blowing was for Enron, and how it affected the employees and the corporation, it is important to look at the many aspects surrounding the scandal. Sherron Watkins, first hand accounts of employees, and whistle-blowing scholars are very helpful in this process.

Many scholars have discussed whether Sherron Watkins should be considered an effective whistle-blower. Leonard Baynes feels that "Ms. Watkins is very lucky; the press and the business community probably were looking for at least one person that they could call a hero in this whole sordid affair, and she came closest to being one" (Baynes 882). He considers her to be a magnified whistle-blower who may not have done quite as much as her reputation credits her for doing. Her case is different from many whistle-blowing cases because she had knowledge of how the money was supposed to be handled due to her accounting training. Moreover, she chose to reveal her information in a way that did not compromise her job security. She was not laid off as a result of her whistle-blowing, but instead was transferred to a different department in Enron. Paul Farhi, a staff writer for the Washington Post, describes Sherron Watkins and other top-ranking women in corporations as "insiders with 'outsider values'" (Farhi C9). Baynes discusses Farhi's comment in the context of the vast attention from the media that Enron has given Sherron Watkins. The press is the main reason she has become such an example to whistle-blowers. She has been able to address large audiences through events such as the speech she gave when she was named Time Magazine's Co-person of the Year for 2002. In this setting, she was able to share her side of the story and also give reasons for the areas where some have considered her to be in error. She feels the biggest wrong that Enron committed to society was a breach of trust. The last comment of her speech was, "It's too important to the capitalist system that we rebuild trust" (Watkins 439).

This frame of mind turns the debate to ethics. The director of the Global Business Ethics Program chose to give a whole lecture concerning Enron's ethical flaws. His speech is about a class he teaches on business ethics. He shows how Enron breaches every topic that his course covers. In class five, Ronald Berenbeim discusses the fiduciary duty of managers and directors. He believes "The duty that is owed is one of good faith and full disclosure" (306). Company executives must be trustworthy in order for a corporation to function properly. Sherron Watkins adamantly agrees with this issue in her speech when she says, "I think we have to see a lot more active boards really running their companies" (439).

The executives also added to the demise of the company through the way they treated their employees. They pushed them to be almost perfect and punished those who did not uphold the standard. Much of the wrongdoing in the company came from reporting significant amounts of earning on the books before they came through, or even never did come through. Ronald R. Sims and Johannes Brinkmann argue that the culture that executives create sets up the way that that company does business. In Enron's case, the executives made poor choices, which drastically affected the ethical health of their corporation and created a culture conducive to cutting corners. They comment on this practice in their article appropriately titled, "Enron Ethics (or: Culture Matters More Than Codes.)" "Enron employees with a self-image of being the best and the brightest and being extremely clever do not make business deals that fail. Therefore booking earnings before they are realized were rather 'early' than wrong. The culture of Enron was quickly eroding the ethical boundaries of its employees" (Sims and Brinkmann 3).

Brian Cruver makes an interesting statement about ethics in chapter eight of his book which tells his personal story of what went on at Enron. He is talking about what he was taking and leaving from his desk when employees were given thirty minutes to clear out of Enron after being fired. What he decided to leave is the important parallel to Sims and Brinkmann's comment of eroding ethical boundaries. " Leave: my Enron laptop computer, my chair, and my Enron Code of Ethics handbook" (Cruver 219). It is evident that Sims named his article based on what was true of Enron. They did not use the handbook they were provided very often in order to stimulate the culture of the company through whatever means possible and make it more profitable.

Enron's ethical misdeeds are very evident in the way they dealt financially with their employees. When employees were fired, they of course expected to receive severance pay for their time of employment according to the company benefit plan. Some were expecting checks of around $10,000 to $15,000 due to their long tenures at Enron. But Enron again surprised the world as each employee only received $4500. This was only the beginning for many employees because their 401(k) plans were attacked next. In the book, Enron: The Rise and Fall, Lauren Fox gave an account of what happened with employee's 401(k) plans.

Like many companies, Enron offered its workers a 401(k) retirement savings plan that allowed them to invest a portion of their salaries in mutual funds in Enron stock, and, again like many other companies, it also matched employee contributions with Enron stock. The result was dreadful. The value of the plans plummeted along with Enron's stock price. Worse, Enron happened to be changing administrators of the plan, so it 'locked down' the 401(k) plan from October 17 to November 19. During that time, plan participants couldn't change their holdings or sell their Enron stock. (Fox 289)

This caused many employees a lot of financial strain because they lost all of their retirement savings along with loosing their jobs. In his article, David Millon discusses the effects of excessive 401(k) plans, such as Enron's plan, on employees and corporations. He explains that "The assets of these plans are heavily invested in publicly traded stock, so their beneficiaries can claim to own, at least indirectly, a large percentage of a significant sector of the means of production in this country" (Millon 836). This is why the results were so devastating to employees. When they could not sell their stock during the "lock down" period that Fox described, they were unable to get rid of their significant holdings therefore causing the value of all of their stocks to be reduced to nothing. Berenbeim also uses this poor example of ethics in his syllabus where he states that "Here we might profitably pursue the question of whether it was appropriate to engorge the company's 401(k) plan with company stock-particularly in circumstances where the plan's shares were less liquid than the holdings of directors and senior officers" (307).

The directors and senior officers Berenbeim mentioned were many of the people whom Enron chose not to destroy. Instead of a $4500 severance check, these people were given significant retention bonuses just before everyone else was fired. $55 million was paid out to 500 employees that were considered invaluable to the company's restructuring plan. Cruver comments about how these payments were taken by former employees. "The so-called stay-on payments had been dished out by some uninhibited jackass who sat around one day and decided 'who gets what.' Was this the same person who sat around one day and decided 'who stays and who goes'" (Cruver 232). Enron's board of directors also made significant payoffs to several charities and individuals who Enron considered helpful and important. Berenbeim states that "There are so many beneficiaries of Enron's generosity that it will be difficult to find critics who are free from any appearance of conflict of interest" (306). This leaves former employees wondering why the generosity and funds that came from somewhere were not directed towards them in any way.

All of these arguments and accounts relate back to an opening statement in Near and Miceli's article, "organizational wrongdoing has become a part of everyday life" (679). Has it has become acceptable in society to cut corners and lie about business affairs? Many scholars think Enron shows that it has become more tolerable to deliberately commit ethical wrongdoing in business. Many propose plans that would help restructure not only Enron but the ways in which whistle-blowing is used. Near and Miceli give a theoretical model, which shows individual and situational variables that affect the outcome of whistle-blowing. The situational variables are more important than the individual ones because they deal more with the attitude of the company. A person can have all the right motives and be perfectly prepared, but it is the way the company reacts to the information presented that determines the successfulness of it. Baynes discusses the Sarbanes-Oxley Act, which is a law enacted as a protection for whistle-blowers. It is an important factor that should be added to Near and Miceli's model because it prohibits discrimination against employees who reveal wrongdoing. As this paper has already stated, Watkins is concerned with rebuilding trust between corporations and their employees. This is a very basic principle held in today's society, but one that is invaluable to not only business, but also life in general. The 401(k) revisions offered by Millon would help protect employees from what happened at Enron. This would establish a type of trust that would allow employees to be secure in their financial status even after being fired from a company. The class syllabus presented by Berenbeim highlights ten very weak areas for Enron that could be improved upon by many of these propositions. All of these propositions are valid and useful for today's whistle-blowers and corporations. It remains to be seen which ones will truly aid in the cessation of wrongdoing. Trust is the most vital and often most underrated of these plans, but one that must be reestablished and implemented in order to stop "questionable or wrongful practice[s]" within corporations (Near and Miceli 681).

Works Cited

Baynes, Leonard M. "Just Pucker and blow: An analysis of corporate whistleblowers, the duty of care, the duty of loyalty, and the Sarbanes-Oxley Act." St. John's Law Review 76.4 (2002). Pro Quest. Oklahoma State University Library. 28 Sept. 2003 http://www.proquest.umi.com/pqdweb.

Berenbeim, Ronald. "Improper Corporate Behavior: Enron's Syllabus of Errors." Vital Speeches of the Day 68.10 (2002): 305-308.

Cruver, Brian. Anatomy of Greed: The Unshredded Truth from an Enron Insider. New York: Carroll and Graff Publishers, 2002.

Farhi, Paul. "A Whistle That Can Pierce the Glass Ceiling." The Washington Post 6 July 2002: C1+. Oklahoma State University Microfilms.

Fox, Lauren. Enron: The Rise and Fall. Hoboken: John Wiley and Sons, 2003.

Millon, David. "Worker Ownership Through 401(k) Retirement Plans: Enron's Cautionary Tale." St. John's Law Review 76.4 (2002): 835-853.

Near, Janet P., and Marcia P. Miceli. "Effective Whistle-Blowing." The Academy of Management Review 20.3 (1995): 679-708.

Sims, Ronald R., and Johannes Brinkmann. "Enron Ethics (or: Culture Matters More Than Codes)." Journal of Business Ethics 45.3 (2003): 243-256.

Watkins, Sherron. "Pristine Ethics: Who Do You Trust?" Vital Speeches of the Day 69.14 (2003): 435-439.

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