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Essay / Research Paper Abstract
This 4-page paper examines the corporate culture and leadership issues behind WorldCom's failure in 2002. Bibliography lists 2 sources.
Page Count:
4 pages (~225 words per page)
File: AS43_MTworldfai.rtf
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Unformatted sample text from the term paper:
as Enron, Tyco International, Adelphia and WorldCom. Though it was the balance sheets that more or less pushed these companies to bankruptcy (or to closure, as was the case with
Enron and Adelphia), more likely than not the particular corporate culture at the time encouraged accounting regularities and falsehoods, which ultimately spelled problems.
Though WorldCom didnt grab the headlines of its nefarious cousin Enron, it still ended up perpetuating one of the largest accounting frauds in U.S. history, reporting accounting irregularities of $11
billion (Scharff, 2005). The company emerged from bankruptcy protection in 2004 after having been fined $750 million in a agreement struck with the Securities and Exchange Commission (Scharff, 2005).
Though WorldCom had achieved its claim to fame as the scrappy long-distance company that brought down the behemoth AT&T in the early 1980s, by
the late 1990s, the company had shifted its name (from MCI to WorldCom) and was being pressured at the time to maintain its incredible historic cash flow levels (EBIDTA) to
keep Wall Street happy (Scharff, 2005). This wouldnt have been such a problem, but orderes for new telecommunications equipment were falling, which, in turn, resulted in several WorldCom executives engaging
in unethical behavior, mostly in the area of accounting (Scharff, 2005). For one thing, the company moved line costs (those paid to local
telephone companies for originating and terminating long distance calls) to capital as prepaid capacity (Scharff, 2005). By doing this, instead of considering this an expense (and it was a large
one), WorldCom could depreciate the costs over time, which, in turn boosted the current years EBIDTA (Scharff, 2005). Accruals also were questioned -
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