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A Look Inside The World Com Scandal

1024 words - 4 pages

WorldCom was the ultimate success story among telecommunications companies. Bernard Ebbers took the reigns as CEO in 1985 and turned the company into a highly profitable one, at least on the outside. In 2002, Ebbers resigned, WorldCom admitted fraud and the company declared bankruptcy (Noe, Hollenbeck, Gerhart, &Wright 2007). The company was at the heart of one of the biggest accounting frauds seen in the United States. The demise of this telecommunications monster can be accredited to many factors including their aggressive-defensive organizational culture based on power and the bullying tactics that they employed. However, this fiasco could have been prevented if WorldCom had designed a system of checks and balances that would have helped them avoid fraudulent reporting. The Sarbanes-Oxley Act has been instituted as a result of the major corporate fraud cases in an attempt to eliminate the possibility of similar cases in the future.
WorldCom’s aggressive-defensive culture based on power led to a chaotic organizational structure, many unethical practices and fostered bullying. This type of culture tends to be found in companies that experience exponential growth and are fast-paced (The Five-Minute Guide to Culture, 2001). WorldCom had acquired companies from all over the country to become the second largest long distance phone company in the United States (Burch, 2009). However, WorldCom’s rapid growth was not handled methodically. They were careless in their acquisitions. In fact, most offices were unaware that other offices existed (Kaplan & Kiron, 2007). Another characteristic of the aggressive-defensive culture is the general employee belief that they must be responsive to the demands of their superiors (Kinicki & Kreitner, 2006). Employees were encouraged to forcefully approach tasks (and people) in order to secure their position in the company and maintain their job. The CFO Scott Sullivan forced his henchman, David Myers to see to it that accruals were released from various business units including UUNET. When Myers ordered the accrual release from UUNET’s CFO, David Schneeman, he met resistance. Myers got angry with Schneeman and ultimately found another person to complete the accrual release in order to appease Sullivan, who worked for Ebbers (Kaplan & Kiron, 2007). Bullying was another tactic of this company. Workplace bullies typically target independent employees who refuse to be subservient (Weidmer, 2011). For instance, when Cynthia Cooper, an internal auditor, was made aware of a questionable transfer, she brought it up at an audit committee meeting. After the meeting, Sullivan screamed at her and told her to stay away from that account (Kaplan & Kiron, 2007). Additionally, victims of workplace bullying may experience various symptoms such as weight loss and difficulty sleeping (Namie, 2003). This is exactly what happened to accounting manager Betty Vinson. Sullivan bullied Vinson into releasing accruals. Vinson was eager to...

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