'Directors still have hands in the till'

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The Independent Online

The whistleblower who exposed the extensive accounting fraud at Enron said yesterday that chief executives were still obsessed by power and greed, and ran their companies like abusive dictatorships while helping themselves to money from the till.

Speaking at the Association of Certified Fraud Examiners in London two years after Enron filed for bankruptcy, Sherron Watkins, a former executive at the disgraced energy company, rounded on recent scandals in the corporate sector as a sign that little had changed in the wake of Enron's collapse.

Ms Watkins said: "Enron is not just some isolated case. The imperial CEO is not dead. There are many acting like dictators in a resource rich African country that are treating assets of the company as their own."

As for recent examples of executive extravagance, she cited Tyco and Hollinger. "Dennis Kozlowski, former chief of Tyco, is charged with using company funds to pay for presents for his wife. Conrad Black at Hollinger was found to have taken millions in non-compete payments for selling some newspapers ... It's like these people want money from the company and then think about what they can call it to make it sound legal."

She blamed the vast sums paid to US executives compared to the average wage of their employees for creating a "generation striving for the executive suite, rather than wanting to run the company better". Ms Watkins said: "Executives make 531 times the average wage of their employees in the US. That compares to 26 times in 1970. This is the benchmark for the next generation of leaders. Why do they always want more? Isn't one yacht enough?"

Ms Watkins came across bogus accounting methods at Enron that hid the company's debts in shell companies using off-balance sheet transactions. After sending two anonymous memos to Ken Lay, chairman of the company, she put her name to her concerns. A chain of revelations ensued, forcing Enron to restate its earnings and end up in the bankruptcy courts with an investigation by the Securities and Exchange Commission. She testified before Congress to implicate her former bosses, Jeffrey Skilling and Andrew Fastow, in creating the fictional accounts. Thousands of employees lost their jobs and a number of executives are now facing criminal charges of fraud and conspiracy. Arthur Andersen, auditors to Enron, was also brought down by the scandal.

She believes the majority of analysis of US corporates is woefully weak, which creates swathes of uninformed shareholders that cannot challenge boards over their actions.Ms Watkins wants shareholders to take a more active role in selecting board members and making their concerns public. She also says the attitude toward whistleblowers must change to promote openness.