A Compromise of Ethics?
When WorldCom, the telecommunications giant, failed and was put into bankruptcy, the U. How could a loss of this magnitude have occured?
Where were the checks and balances? Were they "asleep at the switch? A great deal of my research was obtained from the Report and all of the quotes below can be directly attributed to the Report.
Accounting Misstatements WorldCom made major accounting misstatements that hid the increasingly perilous financial condition of the company. The Report described the accounting shenanigans as follows: As enormous as the fraud was, it was accomplished in a relatively mundane way: In the s, Ebbers was clearly focused on Worldcom unethical behavior impressive growth through acquisitions.
How Worldcom unethical behavior he going to pay for this acquisition binge? By using the stock of WorldCom. To accomplish this buying spree, the stock had to continually increase in value. WorldCom pursued scores of increasingly large acquisitions.
His only recourse to achieve this end was financial gimmickry. The problem is that the more one resorts to this sort of deception, the more complicated it becomes to continue it. Deception is just not sustainable in the long run.
During this time, Wall Street had continuing expectations of double-digit growth for WorldCom. After all, they had achieved so much in such a relatively short period of time.
However, WorldCom needed time for its management to catch up to its newly acquired companies and learn how to run and manage them. Unfortunately, Ebbers did not have the courage to tell Wall Street that WorldCom needed time for the consolidation and digestion of its acquisitions.
For this reason, he had to show continually growing net worth in order to avoid margin calls on his own WorldCom stock that he had pledged to secure loans.
This Debacle Could Have Been Stopped It is obvious that the Board of Directors that was in place when WorldCom was planting the seeds of its destruction could have stepped in and stopped this financial death spiral. Although the Report clearly puts a great deal of the blame on Ebbers saying, " Ebbers, ran the Company As the Report states, " The setting in which it occurred was marked by a serious corporate governance failure The Report of Investigation includes recommendations meant to " An active and independent Board of Directors and Committees; A corporate culture of candor, in which ethical conduct is encouraged and expected, as exemplified by the ethics pledge that the Company and the Corporate Monitor have developed and that senior management has signed; A corporate culture in which the advice of lawyers is sought and respected; and Formalized and well-documented policies and procedures, including a clear and effective channel through which employees can raise concerns or report acts of misconduct.
Two sources of information on how to do this include the articles entitled "Your Corporate Culture: A Boon or a Bane?
Transparency can bring you safety. He also is a frequent speaker on the subject of financial advice for small businesses as well as the IPO process. He can be contacted at Ted capitalsourcepartners.WorldCom A telecommunications company that was said to be the closest thing to a competitor that AT&T had.
The merger between WorldCom and MCI Communications was the largest ever at the time(). A corporate collapse typically involves the insolvency or bankruptcy of a major business enterprise. A corporate scandal involves alleged or actual unethical behavior by .
How Unethical Practices Almost Destroyed WorldCom 1. How UnethicalPracticesAlmostDestroyedWorldCom 2. Group Members• Amit Yadav• Samarpal Singh• Ravindra Kumar• Apporva Verma• Saurabh Tripathi• Udit Varshney• Vimal Verma 3. WORLDCOM LEADERSHIPCEO Bernard Ebbers CFO Scott Sullivan 4.
Ethical Fading: The Role of Self-Deception in Unethical Behavior on explicit tradeoffs between ethics and proﬁts is misplaced; rather, they argue, unethical behavior is due to the “psychological tendencies that create unethical.
When WorldCom, the telecommunications giant, failed and was put into bankruptcy, the U.S. witnessed one of the largest accounting frauds in history. Former CEO, Bernie Ebbers, 63, was convicted of orchestrating this US$11 billion accounting fraud and was sentenced to .
Unethical accounting practices and scandals of the caliber of the Enron / Andersen and the WorldCom scandals is what led the U.S. government to get involved and at the same time contributed to the government’s creation of the Sarbanes – Oxley Act of