Addressing Xavier students and faculty along with members of the Cincinnati business community in her "Moral Leadership in Business" lecture at the Cintas Center Wednesday, Nov. 12, Watkins' message was clear: Ethics need to be a priority for everyone, and those who falter may find themselves paying the price.
The event was part of the Heroes of Professional Ethics lecture series co-sponsored by the University's center for business ethics and social responsibility.
"Even before the rash of corporate scandals over the last couple of years, we have been talking about the importance of ethics here at Xavier," said University President Michael J. Graham, S.J., in his introductory comments. "Today we're doing our job I think as a university."
Watkins jumped right into the Enron scandal, explaining exactly how the events unfolded. A Certified Public Accountant, she joined the company in 1993 and described having a "heady time" enjoying complimentary ski trips and trips to golf tournaments. But in the summer of 2001, she decided to spend more time with her husband and 2-year-old daughter and moved into a more back-seat position.
"That's when I stumbled across what I thought was the worst accounting fraud I had ever seen," Watkins said. It was a simple Excel spreadsheet listing company assets, but the math just didn't add up, and the difference was no small suma few hundred million dollars, in fact.
She had previously turned the other cheek to "aggressive accounting," as did the rest of the employees. She described working for a company with executives gracing the covers of BusinessWeek and Forbes, with Wall Street competing for its business and its stock prices on the rise. Enron was receiving accolades in the business community, which she and her coworkers trusted, she says. But when she found herself holding evidence of fraud, she knew something had to be done.
Watkins started interviewing for other jobs and planned to blow the whistle once she had the safety net of another position lined up. But, abruptly, Enron's CEO resigned. "I felt like he had driven the company into an iceberg, and we were the Titanicand we were going to sink."
When retired CEO Ken Lay stepped back into the job, she felt obligated to warn him, telling him the company might "implode in a wave of accounting scandals." His response disheartened her: He ordered a limited investigation and began unwinding the company's financial hits, acting as if nothing alarming had happened. But within six weeks Enron declared bankruptcy, and more than 4,000 employees were told they already had received their last paycheck and were sent home three weeks before Christmas.
Watkins said that many of her friends who started out as ethical employees now are either facing charges or have been forced to sell all their assets. She used an analogy to explain how people get caught up in unethical business: "If you throw a frog in boiling water, it will jump out and save itself. But if you put it in cold water and heat it slowly, it will boil to death."
The key, she said, is for employees to make sure leaders of their companies demonstrate a pristine value system. "Any erosion of values at the top is magnified at the bottom." She used Ken Lay as an example, saying he forced employees to use his sister's travel agency for business trips even after it caused several hotel and airline reservation mishaps, and he used the corporate jet for personal purposes and at the shareholders' expense.
"Don't work on a structure that makes you feel uncomfortable just because you're following orders. You never know where it's going to lead," she said. "When your gut is telling you something seems off, don't fall into the group-think mentality."
Watkins' experiences at Enron culminated when she testified before U.S. Congressional committees from the House and Senate at the height of their financial investigations of the company. Her honor from Time magazine came for being one of the "people who did right just by doing their jobs rightly." She also is the author of Power Failure, the inside story of Enron's collapse. Her presentation concluded with a question-and-answer session with the audience.
The Heroes of Professional Ethics series is a collaboration between Xavier's center for business ethics and social responsibility, Cintas Corp., and CMC Properties, winner of the Better Business Bureau's International Torch Award for Ethics in 2002. Other sponsors of "Moral Leadership in Business" include the Cincinnati Business Courier and Graphic Data Solutions. Heroes of Professional Ethics aims to make Watkins' presentation the first of what they hope will become "annual ethics days." For more information, visit www.heroesofethics.com.