Executive Compensation and WorldCom - Essay Example

His strategy, however, failed, and the company’s expenses increased as a percentage of total revenue occasioned by a drop in growth of earning. By falsifying WorldCom’s accounting numbers, he hid the operating expenses and instead presented them as long-term capital investments, effectively but falsely showing increased assets. However, concerns arose when AT&T, the then leading telecommunication company, was posting loses yet WorldCom was seemed to be thriving, which led to internal audits that, in turn, led to revelations that accounting standards had not been followed.

Eventually, the company filed for bankruptcy. Feeling unsatisfied with the low profit margins the telecommunication was comfortable with in the 1990s, CEO Bernard Ebbers of WorldCom, which was the second most successful telecommunication company then, acquired more than 60 small telecommunication companies between 1995 and 2000. After venturing into the internet and data business, by 2000 WorldCom was handling not only half of the internet traffic in the United States, but also half of the world’s total emails.

In 2001, it owned a third of the United States’ data cables. From this description, WorldCom was by all accounts a telecommunication giant, only second to AT&T as a long-distance carrier. However, as has been the tradition with executive compensation and remuneration for many years, executives also earn more when the companies perform better (Neokleous, 2013). Bernard Ebbers, therefore, not only made profit for WorldCom’s shareholders and owners, his personal wealth was also growing. Yet, when the industry started experiencing business declines, the company was also affected and the price of its stocks dropped, reducing profits.

Ebbers used unscrupulous means to show that the company was indeed making profits and, as a direct consequence, ensure his executive compensation (Jeter, 2003). This paper will