Tag: compensation policy

Sherron Watkins’ 10-80-10

Last Thursday morning, I went to a gathering at Roosevelt University to hear Sherron Watkins answer questions from a gathering of students and business people. In case you are not familiar with the name, Sherron Watkins is the woman who exposed the wrong doings at Enron. As a VP in Andy Fastow’s group, she notified Ken Lay, Enron’s CEO, of Fastow’s fraudulent activities. Though Lay didn’t investigate the claims in Watkin’s letter, the letter was ultimately uncovered by the government and provided the impetus for their actions against Enron. I was impressed with Ms. Watkins. Smart and Insightful. Uncomfortable with the whistleblower label. She had a number of interesting comments. Of particular interest was her answer to the question of how such egregious behavior could exist in a business. She believes that such behavior primarily comes from faulty compensation policy. She commented that if you divided the people in the room into groups, 10% would always do the right thing no matter what, 10% are likely to be ethically challenged from the get go and 80% could go either way depending on their compensation plan, direction from a superior or recognition that everyone else is doing it so it must be ok. Watkins’ observations should get us thinking (and acting):

- Do I have an ethically challenged 10% in my group?
- Is my culture tempting the 80% to do questionable things? Will they self-police?
- Are my expectations for behavior and performance clear? Is it documented so there is no doubt? Do I communicate it and live it?
- Is my compensation plan and policy consistent with the behavior I want?

In 2004, Ms. Watkins was interviewed for the documentary, “Enron: The Smartest Guys in the Room”. She was asked if what happened at Enron would happen again. There was no doubt in her mind. As the details continue to rollout on our mortgage mess (some coming out yet this AM), it sure smells like Enron like behavior was at play. I’m wondering was it some of the 80% or just the 10%? What do you think?