Examining a Business Failure

Examining a Business Failure (WorldCom)
LaToya Poullard
October 12, 2010
Gale Luquette

Examining a Business Failure (WorldCom)
A business consists of senior leadership, board of directors, internal and external auditors, and administrative staff. They are the key roles in an organization. Their collaboration, good decision-making and collective efforts will determine whether the organization will become successful or not. The chief executive officer (CEO) or the senior leadership cannot operate the organization alone. Therefore, the senior leadership needs input from board of directors before making decisions. The administrative staff gathers information and data that allows the decision-making process to operate smoothly for the CEO and the board of directors. The internal and external auditors make sure that every transaction in the finance department is accounted for. If these key roles do not take their part seriously, it could cause a business to fail.
      In 1983, WorldCom started as a long distance discount service (LDDS) provider. Within 15 years, it grew rapidly through mergers and acquisitions (WorldCom, 2002). The company became known as the world’s second largest telecommunication provider service. In 1989, the company became public and Bernard Ebbers was its CEO. The company merged with MCI in 1998, which was the largest merger in history at the time that equaled to $40 billion. Wall Street highly favored the company’s stock because of its financial status (WorldCom, 2002).
In 1999, the success began to unravel with the accumulation of expenses and debt, the fall of long distance rates, revenue, and stock market. Around the same time, CEO Bernard Ebbers was receiving pressure from the banks to cover margin calls on his WorldCom stock, which he was using to finance other businesses enterprises such as yachting and timber (WorldCom Scandal, 2009). Therefore, he found a way to cover the margin calls by convincing the board of...