Performance of WorldCom - Essay Example

According to the case, Ebbers and Sullivan were the main controllers and masterminds behind the success of WorldCom from the time it was Long Distance Discount Services (LDDS). The mention of this massive success is however overlapped in the case by the accusations of bringing down the company to bankruptcy as a result of massive accounting irregularities, fraud, and conspiracy. Once the company started going under and an external auditing firm was hired to come and audit it, the recommendations from this audit firm were not taken into action immediately by the auditing committee of the company. The case explains that if immediate actions had been taken to examine the massive accounting irregularities discovered by Cooper (an external auditor), then WorldCom would have been saved from bankruptcy. But this was not to be the case.

The board on the other hand had so much faith in Ebbers's leadership as CEO and they were also afraid of the implications the withdrawal of his shares and input to the company would have on WorldCom that they continued to lend him loans and at a lower interest rate. These loans given to Ebbers were for his personal growth and maintenance and they accumulated to over $300 million which was company money but no repayments were forthcoming to benefit the company.

Sullivan together with the fraudulent stockbroker firm (Salomon Smith Barney brokers) hid the truth of the company’s economic performance from the shareholders and stockholders. According to these two crucial groups of people, the company’s quarterly profits and cash flow earnings were admirable, and even more, people still refused to sell their shares even when rumors of bankruptcy of the company started being aired. A later discovery was that the CFO was misrepresenting the accounting records without people realizing and this was even worse in the last five quarters before the bankruptcy was declared.

Once WorldCom was declared bankrupt in 2002 and employees were laid off while the stocks collapsed hence making the investors lose everything, the government intervened and hired a new CEO who was a competent man poached from Microsoft to lead the newly reformed company. The name was also changed from WorldCom to MCI. All these happened in 2004. A new board with powerful people including the former attorney general Nicholas was formed. According to the case, this problem encountered by WorldCom which was once the 14th best company in the US and the 24th in the world can happen to any corporation even in the UK.