Worldcom Case Study

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WorldCom Case Study: Lack of Leadership, Lack of Ethics

Emily Fearnow

ORG 500- Foundations of Effective Management

Colorado State University – Global Campus

Dr. Cheryl Lentz

May 15, 2011

WorldCom Case Study: Lack of Leadership, Lack of Ethics A multitude of choices made by executives at WorldCom led to the ultimate demise of the company as it was previously known, the employees and their livelihoods’, and the trust of the American people. In a time when corporations fail to set ethical standards and provide transparency to investors, how do we change corporate culture on a national level? By analyzing choices made to improve stock prices and company image that ultimately result in failure-- we can guide leaders towards long-term success and corporate stability. The Growth of WorldCom

The WorldCom business began as a small long distance company providing service at a discounted rate. WorldCom grew through acquisitions and mergers throughout the 1990’s, becoming the second-largest long distance phone company in the United States. By acquiring certain strategic companies as MFS Communications and MCI, WorldCom set itself up as a supplier of Internet service and corporate and household telephone service. As WorldCom acquired corporations, the board of directors grew to include executives from these corporations. This action puts WorldCom in a situation without outside input and oversight.

When companies merge and acquire many smaller companies with different computer systems, different management styles, and different cultures the transition can be a rocky one. Differences in corporate cultures and values are often one of the major grounds for mergers to fail (Tichy, 1997). In 1999 WorldCom made a concerted effort to purchase Sprint, however regulators in the U.S. were concerned with the formation of a large telecom company. When this merger was unsuccessful it was noted that the company needed focus from its leadership. (as cited by Kaplan & Kiron, 2007). WorldCom provided no printed guiding principles and the management was not aligned throughout the locations. The culture disseminated from top management was a form of “ready-fire-aim” (Robbins & Coulter, 2007, p. 51). WorldCom passed on a culture of lack of trust of employees and used a controlling style of leadership. Culture at WorldCom

This type of environment left employees with no avenue to express apprehension in regard to company practices. Employees faced personal harassment if they disputed upper management’s decisions. (Kaplan and Kiron, 2007). When employees cannot express concern and frustration they become disengaged from the company and this may spread throughout the organization. If WorldCom had a strong ethical culture, more employees and managers would likely report misconduct and maintain compliance to ethical standards. This type of environment might have prevented the accounting practices that occurred throughout the organization.

As the unethical accounting practices became entrenched in the WorldCom organizations, few managed to speak up. As employees expressed concerns, they were told this was a one-time event and that it would not happen again by the CEO (Kaplan and Kiron, 2007). Certain employees considered resigning, but ultimately decided against it. As the accounting practices continued some employees even received promotions for continuing to changed figures as requested. This type of business practice does not build a “values-based” (Robbins & Coulter, 2009, p.101) corporation. Cynthia Cooper was head of the internal audit department. She began to uncover the accounting practices in use at WorldCom during internal audits. As the audit continued Cooper presented findings to the audit committee, but was told by the CFO to leave certain areas alone. (Kaplan and Kiron, 2007). Cooper was strong enough to continue on her quest for answers surrounding the accounting practices. As...
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