Examining a Business Failure

Examining a Business Failure – WorldCom

Tiana M. Barnes

LDR 531

June 7, 2010

Rovella Phillips

WorldCom, once the number two long distance provider, is heralded as one of the largest business failures in the nation’s history. What began as a small telecommunications company in Jackson Mississippi, headed by Chief Executive Officer (CEO) Bernie Ebbers, quickly grew into the shining star of the southern state and the belle of the Wall Street ball. The company began to notice a decline in 1999 from the slowdown of the telecommunications industry. Pressure on the organizations executive officers to increase company and shareholder profits led WorldCom to make decisions that later gave them the classification as “one of the biggest corporate scandals in United States history” (Braun, Warder, & Zekany, 2004, p. 101). The company began to falsify documents and commit fraud to inflate the company’s profits. When CEO Ebbers stepped down in 2002, after receiving over $366 million in personal loans from WorldCom, the Securities and Exchange Commission (SEC) launched an aggressive investigation into the company’s accounting practices. Ebbers and WorldCom admitted to inflating profits by over $3.8 billion. The SEC also uncovered $11 billion in fraudulent accounting practices, which helped fuel the rise of WorldCom. In the summer of 2002, WorldCom filed the largest bankruptcy in United States history noting $107 billion in assets and $41 billion in debt.

What was once viewed as a huge success story, WorldCom’s fame quickly spiraled into a story of lies and personal greed. Had WorldCom and its executive officers made decisions that benefited the organization, they could have outlasted the downturn in the market and come out on top. There are many organizational behavior theories that relate to leadership, management and organizational structure that lend to the demise of the company. The leadership, management and organizations structures also...