Worldcom: Examining a Business Failure

WorldCom: Examining an Business Failure

University of Phoenix

WorldCom: Examining an Business Failure

“WorldCom is one of the largest telecommunications companies with a 20 million consumer customer base, thousands of corporate clients and over 80,000 employees.” This company is well rounded; it “owns UUNET controlling over 50% of the wires that internet service provider use as superhighways to carry internet traffic between cities and across continents.” “MCI is the long distance unit of WorldCom, which it acquired in 1988.” “WorldCom improperly booked $3.8 billion as capital expenditures, boosting cash flow, and profit over the past 5 quarters, disguising the actual net loss for 2001 and the first quarter of 2002.” “In reality WorldCom would have posted a loss instead of the $1.4 billion net income in 2002.” “The first quarter of 2002 would also post a loss instead $130 million in net income.” “It is possible that the accounting irregularities go back to 2000.” “In simple terms WorldCom did not account for expenses when it incurred them, but hid the expenses by pushing them into the future, giving the appearance of spending less and therefore making more money.”

WorldCom CEO, Ebbers made bad business decisions including taking “personal loans were totaling $366 million” from the company. That was the first mistake the CEO made that led to many more down the road. Ebbers allowed Sullivan, CFO, to make bad business financial decisions. Allowing the CFO to put expenses somewhere in the future rather than the present was extremely hurtful for the company. These errors of judgment and many others led to the downward spiral of WorldCom. To file for bankruptcy and lying off several thousand of employees was a big disappointment for everyone. WorldCom CEO has practiced several unethical behaviors within this company. The CFO also played a role of practicing unethical behavior when he was putting accounting information where it should not...