Fraud at WorldCom – Case Analysis

Fraud at WorldCom – Case Analysis

Summary

Due to the helm of CEO Bernie Ebbers, WorldCom expanded through a series of aggressive acquisitions that catapulted it from a small long-distance carrier to one of “the third largest telecommunications company in the United States”(Ashraf, 2011) in a decade. In fact, under the scene of prosperity, rapid growth brought the emerging……….

Analysis

By using the model for responsible administration, it is clear that both organizational and individual improper conducts were done in WorldCom.

First, in the aspect of Tyranny/Hubris:

• which in turn led to a higher stock price and higher compensation for both employees and management”(Ashraf, 2011).
• ……………..
• The accounting director and the accountant who were involved in above fraud repeatedly performed the illegal operations. After the fraud had been revealed, they sought legal help in the hopes ofrunning away from responsibilities.

Last but not least, the value of internal audit was showed clearly in this case:

• WorldCom’s head of internal audit Cynthia Cooper initiated inquiries(Boatright, 2011), which eventually revealed the fraud. The approach that the audit results are directly reported to the board of directors, not the CEO or CFO, ensures the independence and fairness of internal audit.

Recommendations

There are some external, and internal controls can be applied to shape responsible behavior within an enterprise:

• Make investment decisionson the basis of not only economic analysis but also ethical analysis, emphasizing that social responsibility is the substantive attribute of an operation.
• Establish documented codes of ethics. It is critical to making clear the core values of an enterprise: virtue, moral and responsibility are prior to profits.
• Set up the company’s ethics committee which provides business ethics education andan efficient supervision mechanism – give visible rewords for ethical conduct and punishments for unethical ……………..

As a precaution against tyranny, encouraging employees to speak up and point out ethical and legal issues may help to prevent corruption as well.

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