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Lynn Brewer the Enron Whistleblower's Warning

Confessions of an Enron Executive:   A Whistleblower's StoryWhen Lynn Brewer decided to blow the whistle on dark dealings at Enron, she was treated as a traitor instead of as someone who wanted to save the company. I interviewed her on the role of the whistleblower.

AG. Do you believe what happened at Enron was more a product of the time and the kind of environment in which Enron was operating, or does it rather represent the kind of executive overreaching that could happen at any time in any organisation?

LB. Honestly, Enron’s story is a combination of both points you raise. On one hand, the recklessness of the corporate culture promoted the behaviour that caused the company to implode. However, having said that, today, nearly three years later, the Securities and Exchange Commission (the governing body for publicly traded companies) is receiving 20,000 whistleblowing reports per month, which clearly indicates that perhaps we have an epidemic.

The Sarbanes-Oxley Act of 2002 put in place a number of requirements that will make it more difficult for companies to sustain the sort of behaviour that we witnessed at Enron over a long period of time causing greater damage to the stakeholders; however, there will still be companies that seek to look for the loopholes.

Six years ago, the average amount of time that a mutual fund held stock in a company was three years. Today it’s 11 months, which places incredible pressure on leadership to take aggressive measures to make certain they meet their targets. If a company misses their projections, they are punished by a sell-off of the stock, causing them to create a cycle of yet further aggressive behaviour.

AG. What do you think is innate in otherwise intelligent business leaders that allows them to ignore whistleblowers when the stakes are so high and the consequences can clearly be so disastrous?

LB. I think, at least in the case of Enron, it was three attitudes: 1) Arrogance that caused leaders to discount anyone who might criticize their actions; 2) short term strategy vs. long term sustainability; and 3) denial as to the consequences of the first two attitudes.

Unfortunately, many leaders naively assume that having cohesiveness outweighs the benefits of conflict when actually a true leader doesn’t mould everyone to be a follower but learns to manage the polarities between his or her personality and strategy with those who need to hold them accountable. Certainly a “warning” that we are in the path of a runaway freight train is a good thing. But, in the end, I think most leaders are in denial about the fact that at any time, they could become the next Enron.

AG. Why do you think whistleblowers are treated as pariahs rather than as heroes in the early stages of the “whistleblowing process”?

LB. While most believe whistleblowers are simply disgruntled employees, truth be told, most of the once I have spoken to, myself included, were very loyal to the company but had simply hit their threshold of pain. Rather than sit back and watch the demise of the company, they manage to find the moral courage that allows them to confront their own fears to address the real issues. Quite frankly, any company that refuses to listen to those who have information, whether good or bad, is a disaster waiting to happen.

AG. Do you think rigid hierarchical structures in corporations works against whistleblowing?

LB. Yes. Whistleblowing isn’t necessary where there are open lines of communication. The healthiest organizations have no barriers to the lines of communication. Rigid hierarchical structures tend to disengage employees destroying the communication and thus the loyalty. When this happens, employees (at least in the United States) begin to develop a sense of entitlement. So, rather than “blow” the whistle, they simply begin to steal from the company by taking trade secrets or other liberties with the fringe benefits.

AG. Do you think laid-back corporate cultures such as those that were famous during the dot.com boom are more prone to executive fraud or mismanagement than are formal and hierarchical cultures?

United States) begin to develop a sense of entitlement. So, rather than “blow” the whistle, they simply begin to steal from the company by taking trade secrets or other liberties with the fringe benefits.

AG. Do you think laid-back corporate cultures such as those that were famous during the dot.com boom are more prone to executive fraud or mismanagement than are formal and hierarchical cultures?

LB. I don’t know that I would describe the corporate cultures of the “dot-com” era as “laid-back” as much as immature and lacking in capital stewardship. In my opinion, much of the “burning” through money was brought on by the investment community that promoted the mismanagement of investment funds. Interestingly enough, I think there was sort of an expectancy that a large number of the dot.com companies would fail simply because they had no proven business model, where the more formal cultures tend to have (at least on paper) the representation that they have solid business plans – which is why it is so shocking when these more “traditional” bricks and mortar companies fail.

AG. Do you think such laid-back corporate cultures make whistleblowers’ roles any easier?

LB. Again, I think in a more “laid-back” culture, you tend to have more open lines of communication where more people feel engaged. I think it is important to differentiate between laid-back and unstructured. Enron was not laid-back but unstructured. The structure and controls the company represented they had simply were not there. No controls and no structure will ultimately cause a company to implode. A laid-back culture on the other hand, more along the lines of what we are seeing with Google, can be quite healthy and sustainable Of course, time will tell once Google goes public and the pressures to perform are placed upon them – they may lose their laid back style and if they have no structure or controls; they too will be just
another dot.com failure. However, having said that, the role of the whistleblower is never easy. Statistically speaking, 50% lose their job and 25% of those lose their families.

AG. Is there a different imperative for whistleblowers in emerging economies such as those of Africa in general and South Africa in particular and, if so, what is the difference?

LB. I believe along with an emerging economy comes a greater responsibility – both to act with integrity and to report those who fail to act with integrity. Unfortunately, in the United States, while we make up 6% of the world’s population, we consume 24% of the world’s resources. We have not learned the simple “economics of enough”. Unfortunately, as we move to a more global economy, many countries seek to emulate the United States, which can be a fairly dangerous thing to do.

I fear that Enron was simply a warning sign of where we are heading as a nation and that the same arrogance that brought Enron to its knees is likely to bring the United States to the realization that they may very likely be the next Roman Empire. My hope is that emerging economies all over the world would heed these warnings. Consider the United States your greatest whistleblower.

Lynn Brewer is author of “Confessions of an Enron Executive” and president of The Integrity Institute. She can be contacted on +1 253 843-0202 or by
e-mail at Lynn@TheIntegrityInstitute.org.

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The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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