Management Planning: Worldcom
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Organizations are responsible for the legal, ethical, and social issues that affect each stakeholder within the company. These factors continually impact the planning process performed at each level of management. An organization that neglects to establish and monitor plans can become disorganized and ultimately lose control of practices performed throughout the corporation. A prime example of poor planning due to disregard of legal, ethical, and social issues were the executives employed at WorldCom.
Before 2002, WorldCom was one of the top telecommunication businesses in its industry because of many acquisitions obtained by the company. Due to the increased popularity of the internet and the acquirement of UUNet and MCI Communications, WorldCom share significantly increased. According to Moberg and Romar (as cited in Browning, 1997) “By 1997, WorldComs stocks had risen from pennies per share to over $60 a share.” WorldCom had become an attractive investment on Wall Street. However, the continual attainment of these business transactions created an overwhelming situation for WorldCom management (Moberg and Romar, 2003). The management at WorldCom poorly planned the financial integration of the additional companies which eventually led to the bankruptcy of the successful corporation.
Legal Responsibilities
WorldCom failed to plan properly the combination of economic features of all gained companies into a single organization. The WorldCom management had a legal responsibility to ensure that accounting rules were followed and monetary interpretations were correctly documented. During the integration, WorldCom liberally applied accounting procedures (Moberg and Romar 2003). In addition, WorldCom high level management intentionally falsified financial reports and declared fraudulent stock data to the United States Securities and Exchange Commission. These acts were a violation of the Securities Act of 1933. The objectives of the Securities Act of 1933 are that investors obtain accurate reports of a companys commerce and to prevent misleading securities sales (USSEC, 2007). Although, the USSEC cannot guarantee the information provided by each company; the Securities Act of 1934 grants authority to the USSEC with disciplinary authorization (USSEC, 2007).
Due to these criminal activities, many top executives were convicted fraud and sentenced to spend time in prison. WorldCom activities did not align with the companys overall mission and goals. The actions taken by management were not in the best interest of the customer instead they were consumed with acquisitions and increasing the value of WorldCom Shares. The management also should have considered general accounting practices during their strategic planning. Furthermore, create procedures that protect all stakeholders within the firm.
These legal responsibilities are coupled with ethical responsibilities. Due to poor ethical business practices, WorldCom management participated in illegal endeavors.
Ethical Responsibilities
The WorldCom management had an ethical responsibility to dignify business practices above self-interest. Illegal actions conducted at WorldCom produced short term gains at the expense of long term relationships. Chakraborty, Kurien, Singh, et al. (2004, p. 97) described this practice as “profits at any cost.” WorldCom managers not only intentionally manipulated business transactions but also withheld information about shareholdings. These managers displayed greed and lied about the financial assets of WorldCom in order to gain additional executive compensation. WorldCom management made decisions that benefited themselves and the shareholders instead of recognizing all stakeholders within the company. These decisions needed to go beyond economic factors; WorldCom needed to use moral judgment. WorldCom insufficiently applied corporate social responsibility concepts during normal business practices. WorldCom management did not develop plans in the interest of their workers and suppliers. To prevent the use of dishonest methods toward advancement, many companies require honor codes. Many social responsibilities that organizations employ help to safeguard against unethical business practices.
Social Responsibilites
The application of social responsibilities at WorldCom could have prevented the company downfall in 2002 due to unethical practices. A checks and balances systems are commonly used though out the business world. Nevertheless, WorldCom corporate governance failed to observe the corrupt procedures of the high level management (Chang, 2003). WorldCom Chief Executive Officer Bernard Ebbers had free reign over company decisions and politics. The WorldCom board was not involved enough with the company or employees. Plus, Ebbers was an authoritative member over the board. According to research performed by Chang (2003), nine cases where former Securities Exchange Commission Chairman, Roderick Hills, replaced the Chief Executive Officer during a board counsel, the auditor supplied information that was not made available to the board while the CEO was present. Corporate Governance is “only strong as its weakest link” (Chang, 2003, para. 12). A business needs to plan how and effective corporate governance system should operate. Companies need to develop corporate