StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Responsibilities that Impacts WorldCom - Essay Example

Cite this document
Summary
The paper "Responsibilities that Impacts WorldCom" discusses that WorldCom acquired the mother company of Digex – Intermedia Communications and sold all of its intermedia’s non-Digex assets to Allegiance Telecom. WorldCom was considered a telecom giant and second-largest long-distance provider…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER98.3% of users find it useful
Responsibilities that Impacts WorldCom
Read Text Preview

Extract of sample "Responsibilities that Impacts WorldCom"

WorldCom Table of Contents I. Short Introduction ……………………………………………………… 3 II. Responsibilities that Impacts WorldCom ………………...……………. 3 a. LegalResponsibility ………………………………………………. 4 b. Ethical Responsibility ……………………………………………… 5 c. Social Responsibility ………………………………………………. 6 III. Three Factors that impacts the company’s contingency plan, tactical, Operation, and strategy ………………………………………………… 7 References ……………………………………………………………………… 8 Short Introduction Long Distance Discount Services, Inc. (LDDS) started its operations back in 1983. The company went public 7 years later. When the company merged with Advantage Companies, Inc, the company’s name became LDDS WorldCom in 1995. In April 14, 2003, the name of the company was finally changed into WorldCom. 1 A lot of companies were bought by WorldCom in the past. The companies that were merged with WorldCom were Advanced Communications Corp. (1992), Metromedia Communication Corp. (1993), Reurgens Communications Group (1993), IDB Communications Group, Inc. (1994), Williams Technology Group, Inc. (1995), and MFS Communications Company (1996). WorldCom also acquired the mother company of Digex – the Intermedia Communications and sold all of its intermedia’s non-Digex assets to Allegiance Telecom. Until 2003, WorldCom was considered a telecom giant and second largest long distance provider in the U.S. Responsibilities that Impacts WorldCom 2 A one-time high flyer like WorldCom should be held legally, ethically and socially responsible for having entered into a lot of business contracts with its customers and suppliers. WorldCom should be responsible for its intensive mergers and failure to use the public funds (coming from public shareholders) carefully. It remains questionable for a huge company that has been consistently greedy in entering into mergers with other similar companies to suddenly file a bankruptcy last July 2002. As of 2005, WorldCom is still facing some court trials regarding this matter. Legal Responsibility It is the legal responsibility of WorldCom’s employers to ensure that the company directors operate within the society’s accepted laws and regulations. It is their legal responsibility to register and communicate with the shareholders and ensure them that dividends are paid on time. Top management should also monitor on the company’s financial statement. WorldCom is facing huge financial and legal problems. The company is considered to have defrauded its investors by overstating the company’s earnings up to nearly $10 billion wherein the top management of the WorldCom also gain some profits from their own criminal acts. WorldCom has to be held responsible for taking investors’ money in excess of $176 billion and causing WorldCom’s employees, the state pension funds and shareholders through the lost of jobs, worthless stocks, and losses of 401 (k) savings. 2 The act of overstating of the company’s earning is clearly a criminal act and it is punishable by law. One way or another, someone has to be held responsible for such unprofessional way of doing business.  The impact of legal responsibility of WorldCom on its management planning: It appears like WorldCom is using a bankruptcy protection to avoid paying its creditors, vendors, and suppliers. Without the government penalty or fine, the company could be rewarded for its fraudulent actions – emerging from bankruptcy with an advantage over its competitors, reduced or eliminated debt, and fewer employees. In the absence of filling bankruptcy, the company especially the management and the Board of Directors will be legally held responsible with multiple criminal act against its investors and employees. The easiest way out of an endless legal demands and legal notice is to give up the company by filing a bankruptcy. Ethical Responsibility Business ethics includes avoiding impossible promises and guarantees which are not achievable and accounting staff should reinforce the highest possible reporting and accounting standards and expectations.4 WorldCom is ethically responsible for suddenly filing of a bankruptcy last July 2002. The company should be held ethically responsible for intentionally overstating the company’s earnings up to nearly $10 billion. Speaking of business ethics, a company should always reflect a true financial statement. Any alteration on the accounting figures is considered as fraudulent and is unethical and misleading in the business context.  The impact of ethical responsibility of WorldCom on its management planning: Business ethics in WorldCom is weak that it causes a great impact to many people dealing with WorldCom. These people have suffered from the way WorldCom was running its business. It is clear that the WorldCom management team – particularly the people behind the company is looking only after their own financial gains at the expense of the company’s suppliers, investors, customers, and employees. Based on the ethical business standards, the leader of the company must be responsible for competence, facts and for telling the truth. However, during a court case with Manhattan courtroom with Bernard Ebbers the WorldCom’s former CEO, all the ethical qualities of a leader does not seem to reflect on Mr. Ebbers. He continuously tells a lie in order convince the jury that he has no idea on what is happening with the company. For example: He told the judge that ‘he is not familiar with the technology behind telephone companies and that he does not know anything about finance and accounting.’3 This statement is truly unbelievable and is way below the ethical standards of not telling a lie. Aside from the court care the CEO and other top management officials are facing, the fact that the company was producing a false accounting / financial statement is already considered as unethical or bad business practice. Social Responsibility Social responsibility includes openness and providing a clear dialogue with the stakeholders to ensure a sustainable business and protecting the right of its stakeholders all the time.6 Stakeholders includes any person that has a direct business relationship with the company including the employees, shareholders, customers, suppliers, investors, rating agencies, NGOs and the local communities. The company has to be socially responsible for causing hundreds of people to suddenly lose jobs without notice. The sudden cutting of job opportunity for its employees had caused a lot of financial and emotional security. To think that the 401 (k) savings of these people will remain uncollected and is considered as lost money. Prior to the closure of WorldCom, the total number of state workers in Indiana is around 241,925 employees which has lost a total $66 million in pension fund value. The effect of the WorldCom’s bankruptcy filing caused huge losses in employees’ pension funds – from $351,000 in North Dakota to $1.2 billion in California.2 The sudden closure of WorldCom causes the demand shock for long distance telephone companies. In order that the supply meets the demand for phone calls services between the years 2002 - 2003, the prices of telephone plans have risen between $11 and $23 per month. This issue even added burden to the WorldCom’s stakeholders. The company is also socially responsible for not being open to its stakeholders regarding the performance status of the company. As a company that goes into public, it is a standard operating procedure to declare the actual financial status of the business. WorldCom fails to do this part, instead, they have intentionally altered the company’s financial statement in such a way that they over valued the company’s earnings/profits.7  The impact of social responsibility of WorldCom on its management planning: The inability of WorldCom to protect the right of its stakeholders has caused a lot of mental, emotional and financial suffering to many people. It is clear that the company failed to have a good corporate social responsibility (CSR). In case the top management invested a part of its time and effort in developing a strong CSR within its employees, the gap between employees’ expectations could have been resolved. The huge social responsibility of WorldCom to its employees is one of the major factor which triggered the company’s board of directors to simply file a bankruptcy last 2002. Three Factors that impacts the company’s contingency plan, tactical, operations and strategy: The three main factors which has made WorldCom decide to file a bankruptcy is due to its ballooning corporate debts of around $41B 8; to stop the bleeding in the company’s financial statement by simply accepting the fact the they have lost the business; and to avoid external pressure such as legal demands coming from the creditors, vendors, and suppliers. WorldCom is reported to be the largest company that files the biggest corporate debt of $41 billion. By filing a ‘bankruptcy’, the company could have the reason to stop paying its creditors, vendors, and suppliers for sometime. The company is actually unloading some of its burden from running a business with huge debts. *** End *** References: 1 Wikipedia (2007) ‘MCI, Inc.’ Retrieved: March 26, 2007 < http://en.wikipedia.org/wiki/WorldCom > 2 UCC (2003) ‘Office of Communication of the United Church of Christ, Inc.: An Examination of the Impact of the WorldCom Bankruptcy on the State of Indiana’ March 2003 Retrieved: March 26, 2007 < http://www.ucc.org/ocinc/files/in-rep.pdf > 3 Kidder, R. (2005) ‘WorldCom Ethics: Why the ‘Aw, Shucks’ Defense if Morally Indefensible’ Institute for Global Ethics – Ethics News line. March 7, 2005. volume 8, no. 9. Retrieved: March 26, 2007 < http://www.globalethics.org/newsline/members/issue.tmpl?articleid=0307051742 1372 > 5 BBB (2002) ‘Business Ethics Tips’ Better Business Bureau Retrieved: March 26, 2007 < http://www.bbb.org/BizEthics/tips.asp > 6 Russo, P. (2007) ‘Corporate Social Responsibility’ Alcatel-Lucent Retrieved: March 26, 2007 < http://www.lucent.com/wps/portal/social > 7 Dawn (2002) ‘WorldCom: Debt-for –Equity Deal’ Retrieved: March 26, 2007 < http://www.dawn.com/2002/07/06/ebr8.htm > 8 Beltran, L. (2002) ‘WorldCom Files Largest Bankruptcy Ever’ Retrieved: March 26, 2007 < http://money.cnn.com/2002/07/19/news/worldcom_bankruptcy/ > Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“WORLDCOM Essay Example | Topics and Well Written Essays - 1250 words”, n.d.)
Retrieved from https://studentshare.org/miscellaneous/1539963-worldcom
(WORLDCOM Essay Example | Topics and Well Written Essays - 1250 Words)
https://studentshare.org/miscellaneous/1539963-worldcom.
“WORLDCOM Essay Example | Topics and Well Written Essays - 1250 Words”, n.d. https://studentshare.org/miscellaneous/1539963-worldcom.
  • Cited: 0 times

CHECK THESE SAMPLES OF Responsibilities that Impacts WorldCom

Fraud And Capital Market

According to Scharff, company's strength and survival is demonstrated by the financial position and the level of profits in competitive market structures.... Scharff, states that, the qualities of financial statements or reports have been eroded by individual interests that have resulted in fraud, this can be inform of individual, corporate, online or advanced fee fraud (Scharff 2005)....
10 Pages (2500 words) Research Paper

Corporate Financial Scandals

Everything about Enron seemed larger than life.... From its glittering Houston head quarter reaching to the sky to its spectacular downfall.... But Enron's collapse was more than just a shattering of one American success story.... Enron was the climax of an avalanche of American companies that cost investors as much as 200 billion dollars by issuing deceptive financial reports....
11 Pages (2750 words) Research Paper

Corporate Governance

Aside from discussing the universally accepted roles and responsibilities of shareholders, the board of directors, and the CEO; corporate governance is often used as a policy for the business organization in relation with the actual structure of the board, the activism of the shareholders, and overall business performance (Aguilera et al....
6 Pages (1500 words) Assignment

The Responsibility of the Auditor for Fraud and Error

It also discusses the responsibilities of the business entities' board of directors and management.... This paper 'The Responsibility of the Auditor for Fraud and Error' discusses the auditor's responsibility for fraud.... It studies the link between the objectives of external audit to this responsibility....
6 Pages (1500 words) Lab Report

Understanding Worldcom Bankruptcy, Causes, Effects, and the Role of Staff and the Outcome of the Crisis

The object of this research paper is to come to understand how worldcom Bankruptcy business and accounting fraud took place and how the government and other concerned parties missed on this for so long.... worldcom bankruptcy caused financial sound waves across Wall Street.... To completely paint the picture of the bankruptcy, there is a need to cover practical and academic aspects of organizational structure, the staff (individuals, teams, and groups), and the culture that predominated worldcom and made it possible for the business entity to commit such fraud and deceit....
40 Pages (10000 words) Dissertation

Fraud in the AIS

The research paper showed that the accounting maneuver was exposed by the internal auditor in worldcom.... The risks and threats are clearly seen in the case of worldcom (Beltran, 2002).... nvestigations showed that the accounting maneuver was exposed by the internal auditor in worldcom.... Arthur Anderson had acted in collusion with top management at worldcom to falsify the company's profits with the aim of increasing its stocks....
10 Pages (2500 words) Essay

Law on Corporate Governance

The collapse of Enron and worldcom has enormously affected public confidence, especially on the stock market.... In line with discussing the remunerating approaches, the student will discuss the type of remunerating method used at worldcom and Enron.... The paper "Law on Corporate Governance" highlights that by making the UK corporate governance and company law free from possible loop-holes, the country could avoid going through business scandals which could negatively harm the reputation of the local businesses throughout the United Kingdom....
20 Pages (5000 words) Coursework

The Corporate Governance Regulations

The principles that are set out within a company's corporate governance framework enables mangers to maintain between the.... ... ... The paper 'The Corporate Governance Regulations' is a perfect example of a finance and accounting term paper.... A framework of practices, rules, and processes by which an organization is administrated, controlled, and directed is defined as corporate governance....
12 Pages (3000 words) Term Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us