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Deontological Framework and Categorical Imperative: WorldCom - Essay Example

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Deontological Framework and Categorical Imperative: WorldCom (Add (Add (Add Date) Deontological Framework and Categorical Imperative: WorldCom Introduction The WorldCom scandal, occurred in 2002, was considered to be the largest corporate insolvency…
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"Deontological Framework and Categorical Imperative: WorldCom"

Download file to see previous pages This paper will discuss the ethical issues in the WorldCom case using deontological framework and Kant’s categorical imperative. Ethical Problems While analyzing the WorldCom case, it is obvious that criterionless loan lending to senior executives at shamelessly low rates was unethical even though this practice was legal. The company’s senior executive Bernie Ebbers received $341 million in loan and this figure represented the largest amount any publicly traded company has loaned to its senior executives in the recent past. According to the former SEC enforcement officer Seth Taube, “a large loan to senior executive epitomizes concerns about conflict of interest and breach of fiduciary duty” (as cited in Moberg & Romar, n.d.). Due to such huge loans, WorldCom’s management struggled to maintain a good image of shareholder wealth and market growth. AS Moberg and Romar (n.d.) point out, the company management was forced to do some unethical activities in the best interest of the organization although they were not in the best interest of shareholders and customers. The company could have survived if it had not lent huge amounts to senior executives. The case study also reflects many unethical accounting practices. Unethical book keeping practices assisted WorldCom to present its financial status look better than its actual condition. This unethical practice benefited the company to deceitfully retain the interests of its shareholders and customers. The inflated profits of the company attracted many new stockholders even though the firm had been really underperforming. Referring to the view of Velasquez, Andre, Shanks, and Meyer (n.d.), this practice involves a conflict of rights. In addition, this situation is certainly unethical because a publicly traded company has an ethical responsibility to disclose true and fair view of its state of affairs to its stakeholders. Although auditors proved some questionable accounting practices in WorldCom even since 1999, they did not bring the matter to the notice of stakeholders timely. This practice was also against auditing ethics. A professional auditor has an ethical responsibility to mention doubtful accounting practices in the audit report if he/she discovers any. It was found that the company kept nearly $7.683 billion in improper accounting over the past 3-4 years before its insolvency (Find Law, n.d.). The company’s internal check systems such as internal auditing also performed unethically. If they had timely reported accounting manipulations to the board of directors, the WorldCom would not have become the world’s biggest corporate accounting fraud. The following table illustrates how the company used unethical accounting practices to inflate its earnings in profit. -$ in millions- 1997 1998 1999 2000 2001 Revenue 7384 17678 35908 39090 35179 Operating Income 1018 (975) 7888 8153 3514 Total Assets 23596 86401 91072 98903 103914 Operating Margin (%) 13.78 (5.51) 21.96 20.85 9.98 (Source: Chary, 2004, p. 47) During 1990s, the company was aggressively performing takeovers to expand its market boundaries; however, the company could not maintain a proportionate profitability as it failed to integrate acquired businesses effectively. The table clearly indicates that the company’s operating margin was not satisfactory even in 1998. Although subsequent mergers contributed to WorldCom’s business complexity or did not actually improve its profitability, the ...Download file to see next pagesRead More
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