...EXAMINING A BUSINESS FAILURE Examining a Business Failure Linda Lopez Week One Assignment University of Phoenix Organizational Leadership LDR 531 Group Number: SC09MBA10 G. Edward McCullough, M.A. March 25, 2010 Examining a Business Failure: WorldCom Why do businesses fail? Most business corporations experience company failure because of their lack of organizational leadership and unethical practices, which can consist of fraud, conspiracy, falsifying documents, and embezzlement. An example of a business failure is most recognized by the WorldCom (2002) bankruptcy scandal. Many organizational behavior (OB) theories as it relates to leadership, management, and organizational structure can give in site to explain the company’s failure. Most blame for the WorldCom scandal was placed in its founder and CEO Bernard Ebbers due to his unruly managerial functions (planning, organizing, leading and controlling) that he practiced during his time at WorldCom. WorldCom was known as a telecommunication giant, established from nothing in 1983 to become the biggest accounting scandal in United States (U.S.) history in 2002. According to Jones Jonesington (2007) says, “In 1998, the telecommunications industry began to slow down and WorldCom’s stock was declining which gave CEO Bernard Ebbers increased pressure from banks to cover margin calls on his WorldCom stock that was used to finance his other businesses endeavors (timber, yachting etc.).”(Jonesington, J., 2007) WorldCom took...
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...Examining a Business Failure The following paper will examine WorldCom and how the business failed. It will also compare and contrast the contributions of leaderships, management and the organizations structures to how the organization failed the way they did. WorldCom began as a small long distance telecommunication company and progressed into one of the largest telecommunications in the world and the second largest long distance company. It began as a small company in Jackson, MS by Bernie Ebbers and grew to become a darling of the new economy and of Wall Street. Failure within a large organization WorldCom was the number two long distance provider, in July of 2002 WorldCom file bankruptcy. This was the largest bankruptcy ever in U.S. history with a $41 billion dollar debt load, and more than $107 billion dollars in assets and equipment (Ramero and Atlas, 2002). Bernard John “Bernie” Ebbers the former CEO of WorldCom grew the company into one of the largest communications providers in the world. In light of his resignation from WorldCom in 2002 a Securities and Exchange Commission investigator found out that Ebbers and WorldCom admitted that he had inflated $3.8 billion and it also uncovered some $11 billion in fraudulent accounting practices that had fueled WorldCom’s rise. Ebbers entered the telecommunication industry providing long distance services in 1983 with a Jackson, Mississippi company formally known as LDDS. Ebbers grew the organization with a series of...
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...Examining a Business Failure: WorldCom LDR531 12/13/2010 Lynette Grizelle Over the past 15 years there has been numerous business failures in the United States and most of these failures have been because of inadequate organizational behavior techniques. According to The Great American History Fact-Finder, the WorldCom bankruptcy was the “largest corporate fraud and business failure in the United States” (WorldCom Bankruptcy, 2004). Prior to their fall in 2002 WorldCom was the nation's second-largest long distance and data services provider. They were also known as one of the largest Internet providers in the world and a provider of critical applications for the United States government (Zekany, Braun, & Warder, 2004). Even though WorldCom appeared to being doing well financially according to their financial statements, the truth was the chief executive officer (CEO) Bernard Ebbers, chief financial officer (CFO) Scott Sullivan, and controller David Meyers were enforcing unlawful accounting practices. According to Zekany, Braun, and Warder (2004) “Ebbers made as many acquisitions as he could, relying heavily on using WorldCom stock as currency,” even though the stock was not worth nearly as much as assumed by the public. Cynthia Cooper, internal auditor for WorldCom and her associates began noticing accounting discrepancies years before the organization went under. In an interview with Katz and Homer (2008) Cynthia stated that, “my feelings changed from curiosity...
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...Examining a Business Failure University of Phoenix LDR 531 Organizational Leadership May 10, 2010 Examining a Business Failure For a business to grow and become successful it needs to have a good organizational structure, leaders, and management. Without these items it is very hard for a business to grow and to maintain is status. When a business becomes very successful and forgets about these items, the business will then beginning to have problems. Once a business begins a downward spiral it is very hard to break free from it. WorldCom Inc. was one of those companies in which rose to fortune and fame but came crashing down once these elements were blurred or forgotten. Although the company did try to stay afloat, it was too late to reverse the damage. History WorldCom Inc. was developed by Murray Waldron and William Rector in 1983 by planning to create a discount long-distance provider named LDDS (Pandey & Verma, 2004). Then in 1985 Bernard Ebbers became CEO of LDDS, in which by 1989 it merged with Advantage Companies, Inc, and then in 1992 it merged with Advanced Telecommunications Corp. With these two mergers WorldCom Inc. grew into a large company with in the US and globally as well (Pandey & Verma, 2004). It was not until WorldCom Inc merged with MCI Communication Corp. that it began to have business with over 280 countries and locations worldwide (Pandey & Verma, 2004). WorldCom was listed as one of the Fortune 500 Company in Fortune magazine...
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...Examining Business Failure 1 Abstract The author of this paper will present an examination of the business failure of WorldCom Incorporated and also compare and contrast the leadership management and organizational structures and failures. Examining Business Failure 2 Introduction WorldCom was the second largest long distance provider and on July 19, 2002 filed the largest bankruptcy ever in U.S. history with its $41 billion dollar debt load, and more than $107 billion dollars in assets. In 1999 WorldCom’s profits began to decrease when WorldCom reduced budgets on telecom services and equipment. The former CEO of WorldCom, Bernie Ebbers, submitted his resignation from his position. Being CEO, he was the leader of WorldCom, and as such, should help an employee feel supported and safe enough to discuss openly or acknowledge the problem he or she is responsible for. When he resigned from the company, it raised questions because Ebbers had about $366 million dollars in personal loans from the company. Upon the revealing of his resignation to the employees, they were alarmed that something important was happening within the company, but had not yet been exposed. Bernie Ebbers started out in the telecommunications industry in 1983 providing long distance services in Jackson, Mississippi at a company formally known as LDDS. Over the years, the company grew through a series of business deals. In 1995, the name of the company was changed from LDDS to WorldCom. At...
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...Examining A Business Failure Otis Jones, Jr. LDR/531 February 7, 2011 John D. Thompson Examining a Business Failure Success is the goal that businesses and individuals have in common, but failure is the last option anyone person or standing entity wants to face. Outside failing, but orchestrating fraudulent information just to boost and boast the status of any entity is unethical and disgraceful. Bernie Ebbers, former Chief Executive Officer (CEO) of WorldCom, did what the average business person would not do, commit fraud. WorldCom was one of the leading giants in the telecommunication arena acquiring MCI Communications en-route to global success, but failing at the proposed merger of Sprint. What lead to the lies and deception of WorldCom downfall? This paper will briefly discuss some of the possibilities and the outcome of WorldCom’s fall as well as that of its CEO, Bernard (Bernie) John Ebbers. Contributions of Leadership Bernie Ebbers, CEO of WorldCom, impressed the business world with the fast growth and acquisition of small and larger companies. WorldCom, in the late ‘90s, was the nation’s second largest long distance company led by a man with a vision and drive for success. Bernie Ebbers showed skills of charismatic, effective interpersonal communication, and strong strategic judgment skills. The negative side of this effective leader is Ebbers ability and strength...
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...BKAL3063 Integrated Case Study Group I A141 30 September 2014 Group Members: 1. Rose Atikahanum Binti Abdul Rahman 216666 2. Nor Amira Zuriyanti Binti Khalid 216410 3. Nurulnabila Binti Mohd Sanusi 216516 4. Peggy Liaw Wan Gene 216388 5. Willson Wong 216381 1.0 EXECUTIVE SUMMARY WorldCom was a telecommunications company and formerly known as Long Distance Discount Services (LDDS). The company was handled by Bernard J. (Bernie) Ebbers, one of the original nine investors, and managed to gain profit within one year of management. In order to maintain 42% of Expense-to-Revenue Ratio, David Myers (controller) asked Timothy Schneberger (director of international fixed costs) to adjust $370 million into accruals account. Sullivan (CFO) asked Myers and Yates (director of accounting department) to order managers in the company’s general accounting department to capitalize $771 million of expenses into an asset account. In 2000, Yates told Vinson and Troy Normand (manager in general accounting) that Myers and Sullivan wanted them to release $828 million of line accruals into the income statement. Besides that, the internal audit was primarily exist to measure business unit performance and enforce spending controls, whereas the external auditors, Arthur Andersen, was an independent auditors which performed the financial audits to access the reliability and integrity of the publicly reported financial information. Cynthia Cooper, the head of internal audit, had brought an issue...
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...[pic] WorldCom Case Study FINC 621, Summer 2015 by Hailun Cao Mohammed Altuwaijri Papamagatte Diagne Qian Dou David Ballantine Yanchao Wu Strategic Analysis – Hailun Cao Bernie Ebbers, the chief executive officer, focused on acquisition business strategy. Major Acquisitions includes Advanced Telecommunications Corporation, IDB Communications group, Metromedia Communications Corporation and Resurgens, and Williams Telecommunications group (WilTel). All these firms perform different characteristics in the telecommunications industry. WorldCom faced some issues and WorldCom tried to manage these issues through the expansion business strategy. From the view of risk control, WorldCom met and solved challenges in the following aspects. Firstly, because of the increasing competition, increasing commoditization and low switching costs of long distance service, the long distance calls dropped obviously and long distance firms faced huge pressures under this circumstance. Therefore, WorldCom made acquisition of MCI in 1997. WorldCom made this decision through three main reasons. At first, since WorldCom was the No. 4 long distance provider and MCI was the No.2 long distance provider, the combination of the two firms could occupy 25% share in the U.S. long distance market. This situation consolidated WorldCom’s competiveness in such a depressing environment and decreased the risk in the long distance service market. In addition...
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...Organizational Behavior within WorldCom WorldCom entered the telecommunications market as LDDS in 1983, founded by Bernie Ebbers in Jackson, Mississippi. The company grew dramatically through numerous acquisitions and adapted the name “WorldCom” in 1995. In 1998, WorldCom purchased MCI, the nation’s number two long-distance provider, for $37 billion. WorldCom, considered a major success story of the 1990s, filed Chapter 11 bankruptcy in July 2002. With 65 successful acquisitions, including 11 major companies between 1991 and 1997, WorldCom’s accumulated debts reached $41 billion with assets of $107 billion (Beltran, 2002). WorldCom operated the largest Internet network at the time and employed 60,000 people in 65 countries. The downfall of the colossal giant devastated many shareholders and stakeholders both internal and external. Many believe this collapse inevitable given the factors of the company’s poorly planned growth strategy, unethical behavior, and poor corporate governance. Organizational Structure and Growth Strategy Revenue growth by acquisition laid the foundation for WorldCom’s corporate strategy. Although this strategy propelled WorldCom to the forefront of the telecommunications industry by consolidation, it left the management and leadership unprepared for the challenges of merging corporate cultures. Integrating two very different business leadership styles into a smoothly functioning business requires thoughtful planning and considerable attention...
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...The Rise and Fall of WorldCom Shabnam Rakeen RES500-Fundamentals of Quantitative Analysis Colorado State University – Global Campus Dr. Barry Smith The Rise and Fall of WorldCom The aftershock of the fall of WorldCom was not only felt in the United States but all over the world. Once a company that was ranked number 4 amongst the Fortune 500 companies was losing everything and was involved in turmoil of accounting fraud and financial troubles unimagined to anyone (Pandey & Verma, 2004). The fraudulent activities and financial troubles led to WorldCom filing bankruptcy protection under Chapter 11 and brought the end to a world known telecommunications company. What led to these financial troubles? How could the fraud go on for so long without notice? These were some of questions that the stakeholders of the company were gripped with. The purpose of this paper is to analyze the financial statements of WorldCom and determine whether these statements foreshadowed the troubles ahead. WorldCom was a successful telecommunications company with its history dating back to 1983. It started out as small long distance calling service provider called Long Distance Discount Service (LDDS) in 1983. Bernard Ebbers was one of the early investors in the company and 1985 became the chief executive officer of the company (Pandey & Verma, 2004). Under his direction, the company acquired Advantage Companies in 1989 and became a publically traded company. The company expanded through mergers...
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...Abstract Over the past years, and as a result of high profile firm failures, the economic crisis, and increased regulatory pressure, many organizations have placed a large emphasis on financial risk assessments. The risk assessment process is needed to identify risks that need to be treated within an organization, as well as to provide strategies and methods that are most appropriate to treat these risks. Because many organizations are poorly aligned between their risk exposure and their risk appetite, it is important to engage in the risk assessment procedures. These procedures can help an organization prevent risk exposure and determine if their current operations will result in an increase or decrease of market value and owners’ wealth. As a result of the economic crisis, and the recent increase in corporate failures, organizations can now learn from the mistakes of others. This paper will discuss the mistakes that lead WorldCom, a telecom company that was once the fourth-ranked in Fortune 500, to bankruptcy in 2002, in an effort to demonstrate the importance of successful risk assessment and alignment implementation. Keywords: corporate failure, risk analysis, risk assessment, risk management, WorldCom Over the past years, and as a result of high profile firm failures, the economic crisis, and increased regulatory pressure, many organizations have placed a large emphasis on financial risk assessments. Risk assessment is the process where risk managers analyze...
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...EBF 2 Abstract The following article will discuss the failure of the organization known as WorldCom. It will determine the reason for the fall of the company failure comparing and contrasting what could have been done by management and leadership. The organizational theories that could have predicted the failure of management and the impact of the company’s structure EBF 3 The company knows as WorldCom was one the leading telecommunication giants of its day. WorldCom achieved its position as a significant player in the telecommunications industry through the successful completion of 65 acquisitions. Between 1991 and 1997, WorldCom spent almost $60 billion in the acquisition of many of these companies and accumulated $41 billion in debt. Two of these acquisitions were particularly significant. The MFS Communications acquisition enabled WorldCom to obtain UUNet, a major supplier of Internet services to business, and MCI Communications gave WorldCom one of the largest providers of business and consumer telephone service. By 1997, WorldCom's stock had risen from pennies per share to over $60 a share. Through what appeared to be a prescient and successful business strategy at the height of the Internet boom, WorldCom became a darling of Wall Street. In the heady days of the technology bubble Wall Street took notice of WorldCom and its then visionary CEO, Bernie Ebbers (Moberg, Romar, 2003). Acquisition after acquisition led to started to warrant...
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...ACC 260 Week 2 The Enron and WorldCom Scandals Material A+Grade Get Tutorial by Clicking on the link below or Copy Paste Link in Your Browser https://hwguiders.com/downloads/acc-260-week-2-the-enron-and-worldcom-scandals/ For More Courses and Exams use this form ( http://hwguiders.com/contact-us/ ) Feel Free to Search your Class through Our Product Categories or From Our Search Bar (http://hwguiders.com/ ) Assignment: The Enron and WorldCom Scandals • Resource: Business & Professional Ethics • Due Date: Day 7 [Individual forum] • Review the accounts of the Enron and WorldCom scandals in Ch. 2 of the text: o Enron’s Questionable Transactions on pp. 96-107 o WorldCom: The Final Catalyst on pp. 114-118 • Answer the following questions using complete sentences: o Enron: 1, 3, 5, 6, and 9 on pp. 106-107 o WorldCom: 1, 3, 4, and 5 on p. 118 • Post your answers as an attachment. Clearly label the case and question number for each of your responses. Enron questions 1, 3, 5, 6, and 9 1. Which segment of its operations got Enron into difficulties? The first thing that got them into trouble was the fact that Kopper was appointed to Fastow and he was an employee of Enron. I do not believe that he had the best interest involved. Another thing was that over 11 million was suppose to be invested and it never was. I believe that this was the start of the problems! Another thing was the fact that Enron was incorrectly booking revenue for services that was...
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...Business ethics are a pivotal aspect in strategic business finance, or finance in general. Poor ethical practices and immoral acts have been conducted across many years by many individuals and businesses in the business world in regards to finance. This paper will focus on two of the more well-known ethical issues that occurred in the late 1990s and early 2000s, Enron Corporation and WorldCom. This paper will focus on the factors that led to the demise of the corporations, as well as the violations that occurred within the accounting practices, and the specific ethical violations in strategic financial planning. To summarize, the largest contributing factor to the demise of Enron Corporation and WorldCom was simply corporate governance failure (Stanford GSB Staff, 2016). The smaller factors that led to the governance failure were such things as increases in executive compensation and stock options, jumps to incentives to manage earnings, and major shifts in the structure of auditing firms. These changes directly led to the loss of money and public confidence. These reason can be classified as nothing other than management greed. This can be validated by the statistical increases in worker compensation which rose forty-two percent in the 1990s as well as corporate profits rose eighty-eight percent, the standard and poor index increased two hundred and forty-eight percent, as well as CEO compensation rose four hundred and sixty-three percent during this timeframe (Stanford GSB...
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...Accounting and the Fall of WorldCom Alison Painter Breeden Juanita S. Edwards, CPA ACC 557: Financial Accounting 23 January 2013 Ethics in Accounting and the Fall of WorldCom In 2002, WorldCom was the second largest telecommunications company in the United States, but because of management failures and an unethical accounting culture it went bankrupt. This paper contains a discussion describing corporate ethics currently used in business; WorldCom's background, and the ethical breach; how WorldCom's ethical issue was discovered, describing how management failed to create an ethical environment; and recommendations. A conclusion summarizes the paper. Corporate Ethics If a company is driven by its responsibility to its Shareholders, then it should base its decisions and actions on the best interests of the owners, and generate more profit. If the company is stake-holder driven then its decisions and actions should be based on what is in the best interest of those impacted by the business (Gruble, 2011). Gruble (2011) further argued that "The most widely accepted definition for business ethics says that it is a set of corporate values and codes of principles, which may be written or unwritten, by which a company evaluates its actions and business-related decisions.” WorldCom was a company driven by its responsibility to its shareholders to the point where it began to behave unethically and this ultimately led to its demise. WorldCom History and the Ethics Breach ...
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