Sherron and Goliath: The Enron Scandal
Sherron and Goliath: The Enron ScandalforMaster of Professional StudiesStrategic Human Resource ManagementMolly Colleen O’BrienUniversity of Denver University CollegeApril, 9 2016Instructor: Dr. Cecile Morris SPHR, SHRM-SCPDirector: Patricia Greer, MBADean: Michael J. McGuire, MLSLoyalty is one of the hallmarks of a great worker. Loyalty is considered to be a valued trait of employees to any company. It dictates that the overall interest of a firm supersedes individual pursuits, to ensure that the cumulative goals of the company are ascertained. However, what happens to individual loyalty when in a bid to make a larger profit margin, survive an adverse market situation, or just out of pure greed, the firm engages in questionable activities and corruption? Sherron Watkins had to ask this difficult question in her role as the Senior Vice President of Corporate Development at the Enron Corporation. Her decisions and actions after asking this question led to the demise of the once behemoth energy company. In the article, “Resisting Organizational-Level Corruption: An Interview With Sherron Watkins,” Gerard Beenen and Jonathon Pinto dive deep into understanding Watkin’s ordeal as a loyal employee that was forced to blow the whistle on a company operating by corrupt measures.
In July of 1985, Enron was formed from a merger of Houston Natural Gas and Omaha-based InterNorth. With much success, the company reached number seven on the Fortune 500 list. At Enron’s peak, the company was ranked the sixth largest energy company in the world with shares as high as $90.75 in 2000. Yet, by December of 2001 Enron filed for Chapter 11 bankruptcy. By January of 2002, shares dropped to $0.67 and the Security Exchange Commission opened a formal investigation into Enron’s business transactions (CNN Library, updated April, 26th, 2015). The result was the fall of Enron.There were many contributing factors that led to the company’s demise. Within the article, Sherron Watkins speaks of a company wrought with systematic and systemic corruption. She explains that with Enron, the corruption was due to two main motives, “either to benefit the organization they work for-though they may still get some secondary benefits-or to benefit themselves personally” (Beenen and Pinto, 276). From a top-down perspective the corruption was pervasive and revealed itself in many forms. One of the biggest reasons for the corruption was the extreme pressure from Wall Street to achieve prospective earnings. The goal was to exhibit these earnings at any cost.  “Enron employees went beyond stretching the accounting rules and actually applied them in ways that violated underlying principles” (Beenen and Pinto, 276). As the company reported false earnings, there was also a sense that they felt they were doing nothing wrong.  Machiavellism emerged; the ends justified the means.  As Watkins reports, “Wouldn’t shareholders care if they knew Enron had $38 billion of long-term debt instead of the 13 reported? Wouldn’t they care if they knew the CFO, Andy Fastow, was personally profiting from these confusing off balance sheet financing structures?” (Beenen and Pinto, 276). Watkins has also been quoted as saying, “Accounting just doesn’t get that creative.” (Associated Press, 2006).