The Right Way to Blow the Whistle

Insiders who go public with company dirt often pay a terrible price. Enron's Sherron Watkins may start a different legacy

Enron Vice-President Sherron Watkins has emerged as a hero for speaking out when no one else would about the company's accounting practices. Last August, she dropped her now-famous memo in former Chairman Kenneth L. Lay's in-box, warning that the energy trader might "implode in a wave of accounting scandals." In hindsight, her warning was remarkably prescient.

Future whistleblowers may want to follow her example closely. So far, she's writing a new chapter on how to come forward with important information when no one else will, say past whistleblowers and career experts.

The fate of whistleblowers is often a lot rockier than they expect or deserve. In the past, they've become corporate pariahs, unemployed, and persona non grata within their industries. Some have faced public disclosure of uncomfortable personal details, unearthed after they raise awareness about wrongdoing.


  "The history of whistleblowers is not pleasant to read. They usually don't get good treatment at the hands of their companies or future employers," says Thomas Donaldson, a professor of business ethics at the Wharton School at the University of Pennsylvania. Adds C. Fred Alford, author of Whistleblowers: Broken Lives and Organizational Power (Cornell Univ. Press, 2001): "They [can] pay a terrible price."

Just ask Roger Boisjoly. An engineer for Morton Thiokol, the maker of the solid rocket booster used to launch the Space Shuttle, Boisjoly came forward in January, 1987, claiming in a speech at the Massachusetts Institute of Technology that he had warned his employer about the structural problems that caused the Challenger shuttle to explode a year earlier.

Boisjoly says Morton Thiokol (which no longer exists) eventually fired him. And the aerospace industry, where he had been working for 25 years, closed its doors to him. In a recent interview, Boisjoly says he was "blacklisted, and I knew I would be blackballed. I couldn't get a job if I worked for free." Now 63 and living in Mesquite, Nev., he lectures and leads workshops on changing workplace ethics.


  Boisjoly says Watkins, who could not be reached for this story, has done some important things right. Having clout and recognition within an organization before blowing the whistle can be a bulwark against recriminations later. Indeed, Watkins can't be dismissed as a disgruntled employee. A former Arthur Andersen accountant and eight-year Enron veteran, she was clearly competent. Plus, Watkins was close enough to some of Enron's questionable partnership dealings to realize some of the computations just didn't make sense, her lawyer Philip H. Hilder told BusinessWeek.

All this will serve Watkins well if the company, now in bankruptcy, is broken up. "She showed a lot of integrity and guts, and there will probably be a company out there who would be willing to hire [her]," says Patti Harper-Slaboszewicz, an energy expert for consultancy Frost & Sullivan. Adds Alford: "Usually, the organization has a longer life span than the whistleblower. If Enron had not imploded, [Watkins] would have been about to get her poor performance evaluation. In that sense, she's lucky."

For some whistleblowers, finding a new job and life is complicated by having to fend off personal attacks. An example is Jeffrey Wigand, the whistleblower on Big Tobacco, whose story was the basis for the movie The Insider, staring Russell Crowe. In 1995, following an interview with TV news program 60 Minutes, Wigand became the highest-ranking former executive to disclose the industry's efforts to minimize tobacco's health and safety issues. He was vice-president for research and development at Brown & Williamson from 1988 to 1993. B&W then publicized unsubstantiated allegations of shoplifting and domestic abuse from Wigand's past.


  Today, Wigand, 59, runs a nonprofit foundation devoted to educating children about health issues, including tobacco use and alcohol consumption, in Charleston, S.C. "Those who see something wrong and bring attention to it are not disloyal," Wigand says. He sees encouraging signs for Watkins: "I hope she doesn't go through [what he's gone through], but I don't think [she will]."

What else has Watkins done right? Experts say she's benefiting from an overall impression she acted beyond self-interest. "She was clearly trying to act in the best interest of Enron," says Steve Currall, associate professor of management, psychology, and statistics at the Jones Graduate School of Management at Rice University. "She could have gone to the press with that thing. But she was trying to keep it within Enron and bring the issues to the attention of the top executives," Currall says.

Adds author Alford: "Sherron Watkins was quite clever in that she couched [the memo] in the interest of Enron." She also focused on calling attention to questionable accounting procedure -- not attacking the personal morality of Lay and other executives.


  Once the dust settles, experts point out that Watkins may be among only a handful of executives who actually practiced what Enron claimed were its core values -- respect, integrity, communication, and excellence, or RICE for short. That corporate ethos was plastered on company T-shirts, its intranet, pamphlets, and paperweights. RICE was even emblazoned on a giant banner that hung from the ceiling inside the lobby at Enron headquarters in Houston.

"[RICE] was like a mission statement," recalls Brandon Rigney, a former Enron employee, who now runs a Web site for fellow laid-off colleagues --, named after Enron's street address. Rigney quit late last year and plans to start his own Web-design and -strategy business. As for Watkins, "The former Enron community is going to revere her as a hero," he says.

Says Wharton's Donaldson: "Every now and then, a whistleblower so galvanizes public attention that the person becomes a kind of hero. Watkins may well achieve that status." If she does, her story will be a textbook example for B-schools -- and working executives -- across the country.

By Heesun Wee in New York

Edited by Douglas Harbrecht

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