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Examaning a Business Failure

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EXAMINING A BUSINESS FAILURE

Examining a Business Failure
Linda Lopez
Week One Assignment
University of Phoenix
Organizational Leadership
LDR 531
Group Number: SC09MBA10
G. Edward McCullough, M.A.
March 25, 2010
Examining a Business Failure: WorldCom

Why do businesses fail? Most business corporations experience company failure because of their lack of organizational leadership and unethical practices, which can consist of fraud, conspiracy, falsifying documents, and embezzlement. An example of a business failure is most recognized by the WorldCom (2002) bankruptcy scandal. Many organizational behavior (OB) theories as it relates to leadership, management, and organizational structure can give in site to explain the company’s failure. Most blame for the WorldCom scandal was placed in its founder and CEO Bernard Ebbers due to his unruly managerial functions (planning, organizing, leading and controlling) that he practiced during his time at WorldCom. WorldCom was known as a telecommunication giant, established from nothing in 1983 to become the biggest accounting scandal in United States (U.S.) history in 2002. According to Jones Jonesington (2007) says, “In 1998, the telecommunications industry began to slow down and WorldCom’s stock was declining which gave CEO Bernard Ebbers increased pressure from banks to cover margin calls on his WorldCom stock that was used to finance his other businesses endeavors (timber, yachting etc.).”(Jonesington, J., 2007) WorldCom took another big hit in 2000 when it was forced to abandon its merger with Sprint, says Jonesington. (Jonesington, J., 2007) In 2001, Ebbers persuaded WorldCom’s board of directors to provide him with a nice corporate loan and guarantees, which totaled more that $400 million. (Jonesington, J., 2007) Ebbers plan failed when he was ousted as CEO in April 2002, says Jonesington. Yet Ebbers...

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