In a question-and-answer forum, hosted by Associate Dean Jake Cohen, Watkins told both MBA and Master of Finance students that she was happy to speak at MIT Sloan, because very few colleges prepare students for ethical challenges.
“It’s important for colleges to discuss ethical matters. You will face ethical challenges in your career, and you need to have a plan. You don’t want to be a deer caught in the headlights. You want to recognize it as a problem and move on it. Don’t let ethical problems get so big that they run you over,” she said.
Watkins said that the term whistle-blower has a bad connotation, and felt she did the right thing by going to the company’s CEO to discuss the bad accounting practices that she witnessed.
“I tried to get the leadership of the company to do the right thing. My goal was to get the truth out. I envisioned that the CEO would listen to me — that he would form a crisis management team, restate financial statements, and come up with a plan to face the financial turmoil. I really envisioned the company living. But my warnings were too little, too late,” Watkins said.
The accounting problems were in the $1 billion range and within six weeks of her talk with the CEO, Enron declared bankruptcy.
Watkins told the audience the culture at Enron was all about closing the deal, money and earnings. The company scoffed at values because they didn’t place any importance on them — values were not a part of the company’s performance review process. Bonus checks were larger than many employees’ yearly salaries, Watkins said, and that blinded people.
The fraud occurred at Enron because smart people stopped asking questions, she told students. Watkins also noted that many of these people were the business unit managers and ultimately went to prison.
Watkins advised students to ask a lot of questions if they do not understand what a colleague is working on.
“Ask enough questions so that you understand and can explain the numbers to a kindergartener. If you don’t get the answers you need, if someone cannot explain it to you — then something is wrong. Obviously, graduating from this institution, there is nothing out there in the business world that is too complex for you to understand. But never walk away from a discussion with an inadequate explanation. It should be a warning sign,” she said, adding, “It’s better to look like an idiot, than to be a crook.”
Watkins encouraged students to speak up, and “be noisy,” when they see fraudulent behavior.
Lastly, Watkins left students with this piece of advice, “Work for a company that is proud of its products or services. Don’t work for a company where it’s all about the money. When you’re looking for a place of employment, listen to the water cooler talk. If the talk is always about the stock price, this year’s bonus, or the amount of stock options you have, it’s not the right place to work. You won’t be fulfilled. Money chasing ends in an empty sack. It really should be all about the product and services. Be sure you work for an institution that prides itself on its products and services.”