David Myers, Worldcom Essay Example for Free

David Myers, servicemancom EssayIntroductionWorldCom was Americas second largest telecommunication participation in 2000 (The WorldCom method of accounting malicious gossip, 2002). Making a modest beginning in the hinterland of disseminated multiple sclerosis in 1983 with a meager capital of less than 100,000 USD it reached the pinnacle of incorporated success reporting more(prenominal) than USD 39 billion in revenue and USD 150 million in MCAP (The WorldCom Accounting S after partdal, 2002). In the make for it became 42nd in the Fortune 500 list.Under the leadership of CEO Bernie Ebbers it grew rapidly by agent of acquisitions and increased demand for telecom services farther fuelled the growth of WorldCom during the whole of 90s. However on June 25, 2002, WorldCom announced that it had overstated earnings in 2001 and the first tail of 2002 by more than $3.8 billion (The WorldCom Accounting Scandal, 2002). The ScandalWorldCom grease was one of the biggest accounting scandals of American corporate history. WorldCom was a U.S based telecommunication guild. The WorldCom accounting scandal was disclosed in 2002. The go with had resorted to bilgewaterulent accounting pr representices for five quarters (four quarters of 2001 and the first quarter of 2002) (The WorldCom Accounting Scandal, 2002). The well-known telecommunication lofty society WorldCom and the accounting, auditing and consultancy enterprise were involved in this big accounting fraud. The corporate scandal of WorldCom ultimately headed the confederation towards the disgrace that ensued in the biggest bankruptcy in American history.After this act the partnership terminated the service of the top executive including Scott Sullivan, the Chief Financial Officer and David Myers, the Senior viciousness President and Controller. Myers knew that the accounting entries were made without supporting documentation, were not in conformity with GAAP, were not disclosed to the spend usual, a nd were designed to allow WorldCom to appear to meet Wall Street analysts quarterly earnings estimates.In addition, during the kindred period Myers and others, including members of senior management, made materially false or misleading statements or omissions to WorldComs independent attendants in connection with audits and the preparation of filings with the Commission. Myers violated the anti-fraud, books and records, and internal accountant provisions of the federal securities uprightnesss, and aided and abetted WorldComs violations of the reporting, books and records, and internal control provisions of the federalsecurities laws. Using this illegal accounting practice WorldCom intended to defer and spread the ingestion for the next 5-10 years. Significance of organisational Behavior Theoriesorganisational theories help to the company for surviving in the globose environment. The WorldCom Company CFO and Director may not assume followed effectual organisational bearing t heories. Had they followed good organizational behavior theories, they would save the organization from the adversity. Ethical Decision MakingEthical decision do represents the decision that is based on the ethics. The ethical decision qualification involves make those decisions that are in the favour of all related persons of company such as board of directors, shareh quondam(a)ers and stakeholders. The ethical decision making helps the company for making the goodwill and the broad term survival in the global market.The WorldCom Company did not don the ethical decision making theory as if they did there would bring forth been false numbers reported. The company was continuously doing misrepresentation of the accounts and the company became the bankrupt. If the company CFO and executive would adopt the ethical decision making theory, they would have resolved the bankruptcy due misappropriation of balance sheet of the company (McKenna, 2000). Goal mountGoal nockting theory is very useful methods to motivate the employee to enhance their capacity for attain the organizational goal. Goal bunchting theory directly affects the performance of the organization. This theory helps the employee and the concern people of the company to set the appropriate objective for the organization. If the WorldCom would have adopted the goal setting theory in their organization, its executive and attendee would have not gone for the unethical accounting practices for the business (Griffin Moorhead, 2009). Corporate GovernanceCorporate organization is the set of processes, customs, policies, laws and institutions, which directed, administered and controlled over the corporation (Monks Minow, 2008). Corporate governance is a way by which acompany governs itself for providing the values to their stake holders. The WorldCom did not follow the corporate governance policy. If the WorldCom would have followed the corporate governance it would have not led towards this busin ess failure and company would have not gone for the unethical practices make do in the organization. Corporate governance would have increased the faith of stakeholders towards the company and company would have survived for long time (Monks Minow, 2008). Adoption of Ethical BehaviorThe Ethical Behavior would enhance the performance of the company, because the ethical behavior would creates the good image of the company among the stakeholders. If The WorldCom would have adopted the ethical behavior in the organization it would not have attained bankruptcy in the market. The company acted in unethically to misrepresent the accounts of the company (Salter, 2008). function of Leadership, Management and Organizational Structures Every organization is directed with a particular leadership, management and organizational structure.The WorldCom Company is directed by their directors, CFO and the auditors. If a leader is indulged in ethical practice its follower as well as follows that k ind of management and leadership qualities. The WorldCom auditor was indulged in the misrepresentation of the accounts of the company and due to his this kind of transfer his followers also got indulged in wrong act. How it could have been avoided?We conclude that the debacle in WorldCom could have been avoided by a more independent and watchful board of directors, which should have sent a signal to the company management that somebody, is watching them closely and they better mend their ways and means. The concept of board of directors is age old and when it functions properly it is effective.In this case the independent directors failed in their responsibilities. In almost all corporate fraud it has been seen that the board has been ineffective over a long period of time and aggressive managers use this prospect to take the rein completely in their own hand. We also conclude that Arther Anderson miserably failed in its employment as external auditor. We hold a puppet board and a malleable auditor as responsible in allowing Ebbers and his associates to perpetrate the accounting fraud. Both the board of directors and externalauditors has roles in averting operating(a) risk and they have failed in their responsibilities (McShane, Glinow, Sharma, 2006). The Sarbanes-Oxley ActDue to organization such as WorldCom Congress rush along to pass the complicated Sarbanes-Oxley Act. CEOs and CFOs of public companies are required to personally certify the accuracy of various financial reports, with significant criminal penalties for false certifications (up to 10 years in prison for knowing violations up to 20 years if willful) (WorldCom scandal, nod.). While the penalties sound significant, the governments difficulty in enforcing this provision will likely come in proving that a corporate officers inaccurate certification was through with(p) at least(prenominal) knowingly, as opposed to negligently or even recklessly. However, in short this law made many disclosu res and certifications on the part of the firm mandatory. It also made the commitment of the external auditor binding.This is significant in view of the fact that when WorldCom fraud came to light, Arthur Anderson simply issued a statement saying the snuff it two years accounting statement are no longer reliable without owning lots responsibility. What is noteworthy is the fact that US authority introduced the risk management step in the form of Sarbanes Oxley legislation, making the BOD, the company management and the external auditor responsible and bound by law. In addition, if a public company makes a required accounting restatement due to misconduct, that companys CEO and CFO can be forced to forfeit any bonuses or profits gained from selling company stock for a one-year period.But the lack of definitions for the terms required and misconduct, other potential loopholes, and the SECs queen to grant exemptions could combine to dilute the strength of this provision. The new law makes it somewhat easier for the government to prohibit officers and directors who have committed securities law violations from ever again serving in those positions. However, that potential sanction was at least theoretically available even before passage of Sarbanes-Oxley. ConclusionA leader is a person that directs a company and its management and if he adopts wrong practices to achieve personal goals, the management may range distract and go in the unethical direction. Management of WorldCom was notevaluating the efforts of its executives, CFO and auditors that is a conduct as every business demands continuous evaluation. Another major contributing factor in the direction of companys failure was its organization structure that was not managed and apportioned appropriately by its top management.The organization structure of the World Com was also not appropriate. In WorldCom, there was the lack span of control, means the audit department was not report to the companys upper lev el management and not provides the right reading about the accounts status of the company (Mcshane, Von Glinow Sharma, 2006).There was also lack of transparency in the organization. That means in the organization two divers(prenominal) levels of management did not know about the wrongdoings which they were doing in the organization and there was not flow of information with each other. In any business, the organizational behavior of the company starts from top management. If the top management has high moral, ethical and leadership traits and standards, then so will the employees. The leaders of WorldCom, in this case did not and it not only affected the company but other telecommunications equipment manufacturers, and other employees. Top management must set the standards and keep them. Changing basic accounting procedures and the lack of ethical standards with top management contributed to the fall of WorldCom. ReferencesGriffin.R.W Moorhead.G. (2009). Organizational Behavior Managing People and Organizations (9th ed.). Cengage Learning.McKenna, E. F. (2000). Business Psychology and Organizational Behavior A Students Handbook (3rd Ed.). Psychology Press.McShane.S.L, Von Glinow.M.A. Sharma.R.R. (2006). Organizational Behavior (3rd ed.). Tata McGraw-Hill Publishing Company Limited.Monks.R.G Minow.N. (2008). Corporate governance (4th ed.). John Wiley and Sons. Salter, M.S. (2008). Innovation Corrupted The Origins and Legacy of Enrons Collapse. Harvard University Press.The WorldCom Accounting Scandal, (2002). Retrieved September 7, 2013. From http//www.icmrindia.org/casestudies/catalogue/Finance/The%20WorldCom%20Ac counting%20Scandal.htmWorldCom scandal Lessons for corporate America, (n.d.). Retrieved September 5, 2013. From WSJ.com http//online.wsj.comWorldCom Scandal. (n.d.). Retrieved September 6, 2013. From http//voices.yahoo.com