The WorldCom fraud that came to light in 2002 was an example of many things that went
wrong within the organization. Unethical conduct by its senior leadership beginning with Chief
Executive Officer (CEO) Bernard Ebbers was certainly at the forefront of these problems. The
question is should a CEO like Ebbers have been sentenced to prison for his liability in the
WorldCom scandal? My answer is yes, he should’ve gone to prison as well as other CEOs who
engage in unethical conduct that results in laws being violated. I will support my answer by
taking a look at the duties of a CEO, focusing on leadership responsibilities and accountability. I
will discuss causes of ethical problems in CEOs and finish by discussing utilitarian and
deontological ethical issues as they pertained to Ebbers.
As the telecommunications industry slowed in the late 1990s, WorldCom’s stock price began
to decrease. Ebbers came under pressure from financial institutions to cover margin calls on
WorldCom stock he used to finance other businesses (Vasatka, 2007). From 1999 to 2002, a few
WorldCom senior executives engaged in fraudulent accounting practices. These practices were
designed to portray losses as growth to the public. Ebbers resigned as CEO under pressure for
several reasons unrelated to the accounting fraud on April 29, 2002 (Beresford, Katzenbach &
Cynthia Cooper led an internal audit investigation of suspected accounting irregularities in
May-June 2002. According to Ms. Cooper’s statement, she discussed the investigation with
WorldCom Chief Financial Officer (CFO) Scott Sullivan on June 12, 2002. She then discussed
her investigation with two others on June 13, 2002. They were Max E. Bobbitt, Chairman of the
Audit Committee, WorldCom Board of Directors and Mr. Farrell Malone, engagement partner of
KMPG, LLP, an external audit agency.
The Board of Directors met on June 25, 2002 and decided to publish a revised financial
statement for 2001 and first quarter 2002. They also decided to report this action to the U.S.
Securities and Exchange Commission (SEC) and the events leading up to it (WorldCom, 2002).
The SEC launched its own investigation into the matter (Vasatka, 2007) and brought civil action
against a number of WorldCom executives in June 2002 (SEC, 2002).
WorldCom filed for bankruptcy protection on July 21, 2002. The U.S. Justice Department
brought criminal charges against Ebbers and several other WorldCom executives. For his role in
the scandal, Ebbers was convicted in Federal court on March 15, 2005 and then on July 13, 2005
sentenced to 25 years in prison.
The CEO as a Leader
To examine the issues in this case from a normative ethics viewpoint, I believe that we
should see what a CEO does in performing the leadership functions of their job as they relate to
ethical issues. A good description of the CEO’s leadership role can be found in The Duties of a
Chief Executive Officer (Wibowo & Kleiner, 2005). The authors cite information in CEO
Compensation that a CEO “is responsible for the success or failure of an organization.”
(McClayland, 2002). The dictionary defines responsibility as: 1: the quality or state of being
responsible: as a: moral, legal, or mental accountability b: RELIABILITY,
TRUSTWORTHINESS 2: something for which one is responsible: BURDEN
(Merriam-Webster Online Dictionary, 2008). Therefore, responsibility is linked to good ethics.
Wibowo and Kleiner cite five responsibilities that CEOs have both in profit and non-profit
organizations (McNamara, 2002). These responsibilities are leader, visionary or information
barrier, decision maker, manager and board developer. The CEO’s leadership duties include
“gives the board of directors some advice, promotes organizational and stakeholder changes...
Please join StudyMode to read the full document