Worldcom Failure
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- Date Submitted: 06/19/2010 01:50 PM
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The WorldCom Fall From Glory
WorldCom began as a small telecommunications company in Mississippi called LDDS (Long-Distance Discount Services). However, in July 2002 WorldCom filed bankruptcy with the largest every debt of over $41 billion and a combined loss of $73.7 billion (Padgett, 2002). Wondering how does a company go from double–digit growth on Wall Street to bankruptcy, in the case of WorldCom there were a number of factors. First Bernie Ebbers growth strategy was growth through acquisition; this may have worked if he understood the business and how to properly see the process through. Then there were the loans to senior executives and poor corporate governance practices and all this was perpetuated by the poor leadership of Bernie Ebbers.
Ebbers’ growth strategy could only work if he could reorganize the company allowing it to function more efficiently. Over the next several years, WorldCom would acquire 75 companies; with this continual acquisition of companies it became too much for the company to maintain customer satisfaction before the reorganization process could be completed. This contributed to an unstable atmosphere at WorldCom. This instability lead Ebbers to push his employees to achieve gains at any cost to include fraud (Zekany, 2004).
Ebbers’ need for continuous stock market gains perpetuated his corruption. However, it could have been stopped if only the governance practices had a bigger roll in decisions. Ebbers may have started the corruption but those like the board of directors or Arthur Anderson Auditing couldn’t see past their own corruption to stop his. Each of these entities had a part in being greedy and leading to the bankruptcy of WorldCom. I personally believe that Ebbers is missing a few cellmates (Pelliam, 2002).
Studies later showed that WorldCom found that Bernard “Bernie” Ebbers and CFO Scott Sullivan had built an organizational culture that did not except any doubt or questioning from employees in...
WorldCom began as a small telecommunications company in Mississippi called LDDS (Long-Distance Discount Services). However, in July 2002 WorldCom filed bankruptcy with the largest every debt of over $41 billion and a combined loss of $73.7 billion (Padgett, 2002). Wondering how does a company go from double–digit growth on Wall Street to bankruptcy, in the case of WorldCom there were a number of factors. First Bernie Ebbers growth strategy was growth through acquisition; this may have worked if he understood the business and how to properly see the process through. Then there were the loans to senior executives and poor corporate governance practices and all this was perpetuated by the poor leadership of Bernie Ebbers.
Ebbers’ growth strategy could only work if he could reorganize the company allowing it to function more efficiently. Over the next several years, WorldCom would acquire 75 companies; with this continual acquisition of companies it became too much for the company to maintain customer satisfaction before the reorganization process could be completed. This contributed to an unstable atmosphere at WorldCom. This instability lead Ebbers to push his employees to achieve gains at any cost to include fraud (Zekany, 2004).
Ebbers’ need for continuous stock market gains perpetuated his corruption. However, it could have been stopped if only the governance practices had a bigger roll in decisions. Ebbers may have started the corruption but those like the board of directors or Arthur Anderson Auditing couldn’t see past their own corruption to stop his. Each of these entities had a part in being greedy and leading to the bankruptcy of WorldCom. I personally believe that Ebbers is missing a few cellmates (Pelliam, 2002).
Studies later showed that WorldCom found that Bernard “Bernie” Ebbers and CFO Scott Sullivan had built an organizational culture that did not except any doubt or questioning from employees in...