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Business Ethical Failure: Worldcom - Research Paper Example

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A good example that demonstrates a failure of corporate governance at this early age of the century is the WorldCom case that this research aims at analyzing and recommending possible remedial measures that can assist in restoring ethical behavior in the corporations. …
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Business Ethical Failure: Worldcom
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Download file to see previous pages Upon the disclosure of massive accounting irregularities, WorldCom, which was the second biggest telecommunication company in the world, filed for insolvency in the summer of 2002 in the federal court of Manhattan. The major departures from the desired corporate behavior experienced in the company came because of the failure of the directors to identify and effectively, combat abuses leading to the widespread culture of greed. The failure also resulted from irresponsible members within the corporation to perform their fiduciary duties to the shareholders (Pulliam & Solomon, 2002). The other failure resulted from a lack of transparency in the operations and the management of the company. There was no proper coordination between the board of directors and the senior management of the company. The system of checks and balances in the leadership of the company did not play its role leading to a complete failure of the system of governance.
The real fraud in the company comprised of a series of topside manipulations to the accounting entries to cover dwindling earnings. Mostly, these comprised of wrong drawdowns of accumulated reserves from the acquisition program as well as other sources and inappropriate cost capitalizations that were to be added as expenses. In other words, according to Kuhn and Sutton (2006), it was a very good incident of the so-called ‘books cooking’. The company overstated its earnings by about eleven billion dollars and its balance sheet by about seventy-five billion dollars. Consequently, there was a shareholder loss of approximately two hundred and fifty billion dollars.
The desirable market views of the company in the 1990s sustained by a number of acquisitions. During this time, WorldCom was in a constant mode of acquisition as the means of expanding its operations.  ...Download file to see next pagesRead More
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