Premium Essay

Worldcom Ethics

In: English and Literature

Submitted By botan
Words 948
Pages 4
WorldCom’s Ethics and Competitiveness
By NaShawn Branch

“A man without ethics is a wild beast loosed upon this world.” - Albert Camus

Nobel Peace prizewinner, Albert Camus compared the actions of an unethical man equal to that of a beast. Following Mr. Camus’s assumptions leads one to question, are business leaders who act in an unethical manner considered beastly? How have unethical business leaders changed the way in which companies do business? All businesspersons that act in an unethical manner, regardless on the time era, eventually fail and the ramifications always affect society in the long-term. The socially irresponsible and illegal behavior by these organizations and their leaders cause hardship for thousands of people, damage the loosely woven fabric of civil society, and contribute in creating a moral climate of distrust and cynicism. (Berry & Workman, 2007) Consequently, the lack of integrity degrades the public perceptions and therefore companies become financially bankrupt. The purpose of this paper is to outline unethical violations using World Com as an example. This paper examines the cultural context, the adverse change in business practices, and new research on ethics in the communications industry.

Cultural context in the WorldCom
Before MCI acquired WorldCom, this was the ‘goliath’ of the communications industry. WorldCom was one of the largest telecommunications companies with nearly $160 billion in assets. In 2002, the entire globe was rocked by the WorldCom accounting scandal that led to the bankruptcy of the fourth-ranked Fortune 500 telecom company, and raised several questions in relation to corporate governance, ethical leadership and corrupt practices in American companies.(Pandey & Verma, 2005) Stakeholders who fueled the philosophy of a fast growth culture in which the goal was to become the number one...

Similar Documents

Premium Essay

Ethics at Worldcom

...Review of Accounting Ethics ACC557 Financial Accounting Ethics in Accounting and the Fall of WorldCom In 2002, WorldCom was the second largest telecommunications company in the United States, but because of management failures and an unethical accounting culture it went bankrupt. This paper contains a discussion describing corporate ethics currently used in business; WorldCom's background, and the ethical breach; how WorldCom's ethical issue was discovered, describing how management failed to create an ethical environment; and recommendations. A conclusion summarizes the paper. Corporate Ethics If a company is driven by its responsibility to its Shareholders, then it should base its decisions and actions on the best interests of the owners, and generate more profit. If the company is stake-holder driven then its decisions and actions should be based on what is in the best interest of those impacted by the business (Gruble, 2011). Gruble (2011) further argued that "The most widely accepted definition for business ethics says that it is a set of corporate values and codes of principles, which may be written or unwritten, by which a company evaluates its actions and business-related decisions.” WorldCom was a company driven by its responsibility to its shareholders to the point where it began to behave unethically and this ultimately led to its demise. WorldCom History and the Ethics Breach In 1983, two business men, Murray Waldron and William Rector, created a......

Words: 1851 - Pages: 8

Free Essay

Worldcom and Ethics in Accounting

...Running Head: WORLDCOM AND ETHICS IN ACCOUNTING 1 WorldCom and Ethics in Accounting Brian Bartram Professor Hogan Strayer University Accounting 557 11/05/2012 WORLDCOM AND ETHICS IN ACCOUNTING 2 There have been many corporate and ethical breeches over the years in financial record keeping but it is believed that the current business and regulatory environment is conducive to ethical behavior. Unfortunately, publically traded companies have been prone to the proverb “one bad apple spoils the barrel”. When unethical practices are exposed, of a publically traded company, the effects can be tremendous and affect every individual or entity that is tied to the organization. For ethical principles to apply to companies, it must be shown that they can be considered moral or ethically responsible institutions. The Securities and Exchange Commission (SEC) is a US regulatory agency that has the authority to establish accounting standards for publically traded companies ("Quickmba financial accounting," 2010). When the SEC was established in 1934 there was no accounting standards issuing body. The SEC has encouraged the private sector to set the standards. In 1939, encouraged by the SEC, the American Institute of Certified Public Accounts (AICPA) formed the Committee on Accounting Procedure (CAP) which dealt with accounting issues as they arose from 1939 to......

Words: 2739 - Pages: 11

Premium Essay

Ethics Assignment: Worldcom Case

...Ethics Assignment: Worldcom case Introduction: On 21 July 2002, WorldCom, Inc., the then-second largest telecommunications company in the U.S. filed bankruptcy protection. Its failure was due to its executives’ bad business behaviors to manipulate earnings with improper accounting entries. The key persons involved in the fraud were as follows; CEO Bernard Ebbers, CFO Scott Sullivan, the accountants were Bufford Yates (Director of General Accounting), David Meyers (Controller), Troy Norman (Director of Legal Entity Accounting), and Betty Vinson (Director of Management Reporting), pressured by CEO and CFO to prepare improper accounting entries. Those executives and accountants were convicted of securities fraud and received federal jail sentences after the manipulation came out in public. What institutional setting and pressures is Betty Vinson exposed to? WorldCom profits gone down in October 2000, and Better Vinson’s boss, Buford Yates (Jr. Director of General Accounting) asked her and another manager to release $828 million of line accruals into the income statement. The company was facing revenue and pricing pressure then, and the CEO had threatened his staffs about how he and other directors would lose everything if the company did not improve its performance. WorldCom’s corporate culture of encouraging “systemic attitude conveyed from the top down that employees should not question their superiors, but simply do what they were told” also made it more difficult for......

Words: 664 - Pages: 3

Free Essay

Review of Accounting Ethics

...Running head: Review of Accounting Ethics 1 Review of Accounting Ethics Cynthia Harley Dr. Julie Hamm Acc 557 5/1/2014 Review of Accounting Ethics The WorldCom Scandal Vikalpa: The Journal For Decision Makers provides us with the following excerpt from WorldCom’s 2002 press release: CLINTON, Miss., June 25, 2002 –- WorldCom Inc. (Nasdaq: WCOM, MCIT) today announced that it intends to restate its financial statements for 2001 and the first quarter of 2002. As a result of an internal audit of the company’s capital expenditure accounting, it was determined that certain transfers from line cost expenses to capital accounts during this period were not made in accordance 2 with the generally accepted accounting principles (GAAP). The amount of these transfers was $3.055 billion for 2001 and $797 million for the first quarter of 2002. Without these transfers, the company’s reported EBITDA would be reduced to $6.339 billion for 2001 and $1.368 billion for the first quarter of 2002, and the company would have reported a net loss for 2001 and for the first quarter of 2002 (Pandey & Verma, 2004, p. 113). This information came at a time where the company had reached an all time high in the industry, second only to AT&T. The company originally started out as a small provider of long distance telephone service in Mississippi under the name LDDS and later changed its name to WorldCom. During the 1990’s the company took on an aggressive acquisition strategy acquiring the......

Words: 1671 - Pages: 7

Free Essay

Ethical Behavior in Finance Reporting

... many unethical accounting scandals existed. The WorldCom scandal is one of the most known unethical scandals. WorldCom submitted the largest bankruptcy filing in United States’ history after admitting improperly accounting for more than $3.8 billion dollars in expenses (Moberg, 2012). The company used acquisitions to spurt large growth. Two of WorldCom’s acquisitions included MCI Communications and MFS Communications (UUNet). This caused WorldCom to appear more favorable on Wall Street, and many banks, brokers, and investors gave strong buy recommendations (Moberg, 2012). This was not unethical; however, what investors and others were to uncover in the coming years, was. Through its favorable stock, WorldCom acquired MCI Communications and MFS Communications, which allowed WorldCom to offer long distance, local service, and data services (Moberg, 2012). Chief Executive Officer Bernie Ebbers led the company’s stock to increase from pennies, to more than $60 per share (Moberg, 2012). Where the unethical behavior of WorldCom occurred was in financial reporting. The company would write down millions of dollars in assets it acquired. According to Moberg (2012), “[It] included in this charge against earnings the cost of company expenses expected in the future. The result was bigger losses in the current quarter but smaller ones in future quarters, so that its profit picture would seem to be improving” (para. 13). WorldCom also reduced the book value of some of the......

Words: 757 - Pages: 4

Free Essay

Ethics in the Corporate World

...Ethics in the Corporate World ACC 557 Financial Accounting January 26, 2014 In today’s society, it seems that most companies are out to chase the almighty dollar and have little to no concern for the repercussions of their actions. In this paper, we will address five aspects of the corporate world and the ethical breaches that have been made in the last few years. The company that we will look at for examples is WorldCom. WorldCom was one of the companies that led to the creation of the Sarbanes-Oxley Act of 2002. The five questions that we will address in this paper are: 1. Is current business and regulatory environment more conducive to ethical behavior? 2. What impact was done to WorldCom because of the accounting ethical breach? 3. How was WorldCom caught and how they failed to be ethical? 4. What accounts were impacted and the resulting impact on operations? 5. What measures could have been taken to prevent this breach? The first thing that we will do is to describe how WorldCom came to be one the biggest companies in the telecommunications industry. WorldCom began in 1983 in Clinton, Mississippi as a long distance company called Long Distance Discount Services. As a result of several mergers that began in 1985 after the board elected Bernie Ebbers as the company CEO, the company grew by leaps and bounds. On November 4, 1997, WorldCom and MCI Communications announced their $37 billion merger to form MCI WorldCom, making it the largest......

Words: 1447 - Pages: 6

Premium Essay

Enron, World Com, & Tyco Scandals

...used to inflate revenue numbers by manipulating projections for future revenue. Sherron Watkins, an Eron VP, wrote an anonymous letter suggesting that the CEO had left the company because of improprieties and other illegal actions. She questioned the accounting methods and specifically citied certain transactions. Once Enron’s stock began to fall below a certain point, the results started to show on the financial statements. Finally in November of 2001 Enron officials admitted to overstating company earnings and filed for bankruptcy. This resulted in jail time and 78 counts of fraud for Andrew Fastow, CFO and 24 years in prison for prior CEO Jeff Skilling. WorldCom had a similar situation, as the expenses as a percentage of their total revenue increased because the growth rate of its earnings dropped. As a result, WorldCom reduced the money it held in reserve by $2.8 billion and moved this money into the revenue line of its financial...

Words: 947 - Pages: 4

Premium Essay

Accounting Fraud at Worldcom

...Accounting Fraud at WorldCom WorldCom grew rapidly in the 1980-90s through its various inorganic acquisitions – the resultant was a corporation with a hotchpotch of diverse and unaligned cultures. Exacerbating the situation, the Management (including the Board of Directors and CEO Ebbers) did little,if anything, to address the multiplicity of deontological and consequential ethics coexisting at WorldCom. CEO Ebbers in fact called an internal effort to create a corporate code of conduct a “colossal waste of time”. At WorldCom, the culture was also very much “top-down” – Managers gave instructions and employees were expected not to question their superiors. Any objections or challenges to senior managers are met with denigrating remarks or personal threats. The company also had a culture of compensating acquiescent employees generously, often beyond the company’s approved salary and bonus guideline. This further fueled a company culture of “do as told and be rewarded”. This was the institutional setting, which Betty Vinson was exposed to when she started working with WorldCom in 1996. In 2000, when Betty was asked to release the $828 millions of line accruals into the income statement, she herself recognized this as “not good accounting” practice. But after Yates (Director, General Accounting) replied that he himself was not happy with the transfer and that Myers (Controller) assured him that this was not going to happen again, she gave in to them. From a......

Words: 1067 - Pages: 5

Premium Essay

Worldcom Case Analysis

...Shiqi Wang ACCT 4456 Professor Steve Jensen September 22, 2015 WorldCom Case Analysis According to the section 301.4 of Sarbanes-Oxley Act of 2002, each audit committee shall establish procedures for complaints regarding accounting, internal accounting control, and auditing matters, and the anonymous complaints regarding questionable accounting or auditing matters. However, in this case, the WorldCom Company did not have the procedures for anonymous complaints, so Cynthia Cooper decided to go over Sullivan’s head and reported her findings to the audit committee. This was a huge gamble for her and was risking her career. Section 406 of the Sarbanes-Oxley Act of 2002 requires the disclosure of the code of ethics for senior financial officers. The commission shall issue rule to adopt a code of ethics, and if not, reasons must be disclosed. Also, section 406 defines “code of ethics” and requires the commission to disclose its changes of the code of ethics. The Sarbanes-Oxley Act was developed after a series of financial fraud events to prevent fraud incidences. In my opinion, Sarbanes-Oxley Act has an effect in preventing fraud incidences from occurring. First, it gains people’s awareness of ethical issues and consequences they will face in a company when they are in an ethical dilemma. Thus, the act provides a guide for the direction of managers’ behavior. Second, not only in the WorldCom case, but also in other financial fraud events that occurred during 2001 and 2002,...

Words: 967 - Pages: 4

Premium Essay

Ehical Decisions

...and in some of those it results in the ruin of what started out to be a good thing. Some of these companies started out as small prosperous businesses that later grew into large dominate organizations for example; Enron, and of course WorldCom. These businesses began with good intentions and ended up internally combusting. All of it was due to the result of GREED. Greed is a disease, and has plagued several organizational leaders over time and caused them to go against their good ethics and morals. There are many opinions as to why people commit the acts that they do but the bottom line is that money will sometimes bring out the evil in the best of people and Leaders of Corporate America are not immune. Background: The beginning phases of WorldCom began in 1983 with a plan to create a long distance telephone carrier service named (Long Distance Discount Service) Mr. Ebbers was one of the major investor’s and later became the CEO. Like most businesses this one was no different and grew over the years and changed the name of the company to WorldCom. WorldCom grew into a worldwide known company. WorldCom became the second-largest long-distance telephone company in America (Daniels 2005). At first it seemed as though WorldCom was going to become the world’s most renowned company for the telecommunication community. However, it became known as one of the largest bankruptcy filings in U.S....

Words: 1283 - Pages: 6

Free Essay

Ac504: Ethics

...Assignment I: Tainted Baby Powder Milk 1. Yes, I believe there has been some damage to’s reputation because there was a significant stock price drop from $308 to $110. Stock price drops usually are the result of a lack of confidence by the stakeholders in the future performance of the company. Lack of confidence can often be attributed to actions by a company that are revealed to the stakeholders. 2. Future reputational damage could be reflected by a lack of confidence of the stakeholders. This lack of confidence could be measured in consumer behavior. Consumers could choose to buy goods elsewhere, so as not to risk their family’s health by potential tainting of products. This change in consumer behavior has been demonstrated many times when the media reports a fast food restaurant serving tainted beef, or even the drastic reduction in air travel immediately after the attack on the World Trade Center on Sept. 11, 2001. Even though, 9/11 was not the direct fault of an airline, consumers feared more attacks and therefore would not travel. This greatly affected profits and stock prices of the airline industry. 3. Baidu must prove to the stakeholders that it is reporting the issue fully and honestly. It is tempting for companies to withhold damaging information, but eventually it will come out and the deception is more damaging to the company many times than the truth ever would have been. The more transparent the company is in communicating the issues, the......

Words: 1339 - Pages: 6

Premium Essay


...Introduction On July 21, 2002, WorldCom, the second largest telecommunications company in the U.S applied for bankruptcy protection. The failure of WorldCom was due to the bad decisions of its executives to manipulate earnings with improper accounting entries. The key executives involved in this fraud were CEO Bernard Ebbers and CFO Scott Sullivan. Also, the accountants Bufford Yates, David Meyers and Troy Normand were all involved in this event. In this case, the accountant Troy Normand was pressured by Sullivan to prepare improper accounting entries. He was told to mark operating costs as long-term investments, which is a part of the assets. In this way, huge losses in the operation became enormous profits. The purpose of this report is to identify the ethical issue faced by Troy Normand, and what we should do if we are in the same situation as him. The Ethical Issue- Troy Normand in the WorldCom case Ethical issue is a problem or a situation that requires a person to choose between alternatives that must be evaluated as right or wrong. Accounting ethics is specific to accounting. Every accountant is expected to adhere to ethical standards which are designed to ensure that accountants behave in a way which is ethical and consistent. However, in this case, Troy Normand has already knew that the accounting entries which they made was incorrect, but by the pressure of CFO Scott Sullivan, Troy chose to follow the instruction of his boss, and he did not adhere the......

Words: 733 - Pages: 3

Premium Essay

Fraud Case

...CASE 4: ACCOUNTING FRAUD AT WORLDCOM Betty Vinson: victim or villain? Should criminal fraud charges have been brought to her? How should employees react when ordered by their employer to do something they do not believe in or feel uncomfortable doing? In discussing whether Vinson should been charged with criminal fraud, it can be analyzed from ethical perspective which can truly judge whether she was morally responsible for the wrong or not. In order to determine whether Vinson was morally responsible for the fraud, these three criteria should be fulfilled first: causality, knowledge and freedom. The causality criteria can be referred as whether that individual caused or helped cause the wrong, or failed to prevent it when she could and should have. The knowledge criteria then requires the individual to did so knowing what she is doing while freedom criteria requires the individual did so own her free will before being morally responsible for causing the wrong. Examining the cause of the fraudulent activities, Vinson initially been pressured by Yates, Myers and Sullivan to aid in painting the financial result of the company only one time and assured by Sullivan that he would take full responsibility for the action. Being a senior manager worked under them and believing in Sullivan’s words, Vinson did as told accordingly. However, she decided against quitting when been asked to continually carry out the wrong as she justified herself as the main supporter of her family.......

Words: 1208 - Pages: 5

Premium Essay

Auther Anderson

...Arthur Andersen: Questionable Accounting Practices Steven Young Strayer University Business Ethics: Ethical Decision Making and Cases Dr. Mary Tranquillo November 13, 2012 Arthur Andersen: Questionable Accounting Practices p1 Arthur Andersen, one of the largest accounting firms in the United States, “a name that was synonymous with trust, integrity, and ethics” (Ferrell, Fraedrich, & Ferrell, 2011, p. 348), through a loss of its founder Arthur Andersen, and change in its corporate culture resulting in many unethical business transactions that affected multitudes of primary stakeholders had to close its doors in 2002 after 90 years of business. Review the mandated requirements for legal compliance (from chapter 4) and determine which requirements apply to the Arthur Andersen case. Explain your rationale After re-reading Chapter 4 there are five areas that separate the mandated requirements for legal compliance, and I feel the that two apply to the Arthur Andersen case; the protection of consumers, and incentives to encourage organizational compliance programs. In the laws that protect consumers they require businesses to provide accurate information protecting them from financial scams, unfair, fraudulent, or deceptive practices. There are “Gatekeepers” that are in charge of that such as lawyers, financial rating agencies, and financial reporting services that help enforce high ethical standards. ......

Words: 1433 - Pages: 6

Premium Essay


...Jack in the Box Unethical Accounting Business The article I have chosen to summarize highlights the accounting practices of a San Diego--based company, Jack in the Box, Inc. (NYSE: JBX). In addition to summarizing the article, I will discuss how the concepts of the article relate to my organization The Platinum Company Inc., including, making recommendations for improvement for my organization based on the article. Lastly, explain the importance of ethics in accounting and financial decision making. Although Jack in the Box remained strong with widely varied menu items and unique marketing strategies through the E. coli disaster of 1993, the current economic slump in the fast food industry highlights serious controversy over the company's new growth strategy and accounting practices (Bauder). In this article, analysts are challenging the accounting practices of a San Diego-based company, Jack in the Box. In their 10-k report, Jack in the Box is listing franchise sales as "other revenues", which on paper triples their operation income to $9.1 million. David N. Allen of investment banking firm Caris & Co., questions this practice as the, "Selling of company assets to franchisees is not the same as selling a food product". He goes further saying that the company should separate operating earnings from non-operating income. Reporting gains from asset sales to franchisees is inappropriate. Jack in the Box countered this claim by stating that other fast food chains use the......

Words: 748 - Pages: 3