Essay on Worldcom: a Business Failure

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WorldCom: A Business Failure Jessica Flores LDR/531 April 23, 2013 David Van Gorder

WorldCom: A Business Failure The late nineties marked a page-turner in US history as it pertains to corporate fraud. The top management team of WorldCom used fraudulent approaches to inflate the value of its stock by misrepresenting its financial corporate standing, falsifying its growth, and profitability reports ("WorldCom Scandal: A Look Back At One Of The Biggest Corporate Scandals In U.S. History", 2007). What would cause a group of cohesive, white-collar professionals to turn the cheek and surrender their moral ethics and corporate citizenship so willingly? This paper will explain how specific organizational-behavior theories could have explained the company’s failure. It will also compare and contrast how leadership, management, and the organizational structure contributed to WorldCom’s demise. Trait Approach Understanding organizational behavior and explaining effective leadership can help to demonstrate the significance of strong ethical and moral leadership that was evidently lacking in this corporate structure (Santa Clara University, 2006). It is also important to recognize the inherent traits and characteristics of the primary leaders, the followers, and the situation. Chief Executive Officer and leader of the pack Bernard Ebbers revealed his motives, personality, and values as zoned in on illusory opportunities he sought to seize without fear of consequence(s). Followers such as Chief Financial Officer Scott Sullivan reported to have “held misguided reputations among employees for having impeccable integrity” (Scharff, 2005, p. 112). The leaders earned renowned awards and hefty financial bonuses that could have made it difficult for finance and accounting employees to doubt their motives. Other managers in the organization did not challenge or question the CEO or CFOs authority they obediently completed tasks he or she is assigned. In this situation, these leaders held exclusive power, position, and authority (Yukl, 2010). Leadership “In a given group or organization, leadership can intentionally exert influence over other people to guide, structure, and facilitate activities and relationships” (Yukl, 2010, p. 3). Although the corporate model grounds Ebbers as the conglomerates highest ranked leader, observers of its aftermath ironically confirm Ebbers as initiating much of the culture and pressure that allowed the fraud to transpire (Scharff, 2005, p. 109). Leader effectiveness is most demonstrable within a group or team that exceeds performance expectations through carefully setting goals and attaining it. In the case of WorldCom, senior executives established they were more than willing to follow their fearless leader in taking astonishing risks to the point of engaging in fraudulent activities. The negative effects caused by this level of deviant leadership only proved how detrimental its financial misrepresentations imposed on the organization, its employees, its shareholders, and the entire telecommunications industry. Management Also reported by Scharff (2005) is the evidence in which C-level executives focused on maintaining phony financial goals instead of doing the right thing. Ethics became soluble at every level in the organization. For example, even the auditing department managers who recognized financial reports did not align with accounting checks-n-balances failed to report such discrepancies or escalate them to their superiors. Mismanagement also reveals Ebbers not only created the
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