When Integrity Is Forsaken in the Business Industry, Essay Example

WorldCom was a U.S. based telecommunications company. It changed its name to MCI, Inc after it was involved in a major security fraud scandal in 2002. The company then filed for bankruptcy, the largest bankruptcy filing in American history. The Chapter 11 bankruptcy protection filed by WorldCom on 21^st July 2002 yielded the agreement that the company had to pay $750 million to the Securities & Exchange Commission in cash and stock which was intended to be paid to the wronged investors. After an investigation by the Justice Department, executives involved in the fraud faced criminal charges. The company founder and former CEO Bernard Ebbers, sentenced for 25 years in prison, former CFO Scott Sullivan sentenced for 5 years in prison (Romero & Atlas, 2002).

The WorldCom’s security fraud scandal led to significant layoffs. These employees lost their 401K retirement plans with which they had heavily invested in the company’s stock. Its collapse was also felt by the wider economy. Banks, suppliers were not getting paid and other telephone companies had to come up with ways to contain their exposure by firing thousands of its staff (Colvin, 2005). Loans from WorldCom provided Ebbers the funds with which to conduct his personal business. These loans were the shareholders’ money mostly their pension funds and were perceived as an abuse of position as they were contrary to the interests of WorldCom and its shareholders.

The bankruptcy filing relieved WorldCom of most of its debt but it retained most of its assets. Ten years from now, though WorldCom would have disappeared into Verizon, those who were directly and indirectly impacted by the ways in which this company violently reshaped its industry will still remember the actions of its executives and how they took advantage of their trust.

Martha Stewart, a media celebrity and founder of Martha Stewart Living Omnimedia, was involved in an insider trading scandal involving ImClone’s stock price declining sharply. The U.S Securities and Exchange Commission investigations revealed that numerous executives of ImClone had sold their stock due to confidential information that only few were privy to. Martha Stewart maintained her innocence but was found guilty and sentenced on July 16, 2004 to 5 months in prison, 5 months of home confinement and 2 years probation for lying about a stock sale, conspiracy and obstruction of justice (Grogoriadis, 2012).

Martha Stewart’s actions had affected earnings at the Martha Stewart Living Omnimedia, decreasing with revenue dropping immediately following the scandal (McClam, 2003). Ten years from now, Martha Stewart’s scandal would probably be remembered as just another celebrity scandal and be written off by the people.

Integrity and fairness are some of the most basic concepts of ethics in business. They involve social responsibility and handling people fairly. The shareholders and those employed by the business industry rely on trust that their best interests are being considered. This is trust on the integrity and fairness of those in charge. Fairness results in a situation where those involved win while integrity ensures honest practices are adhered to (Solomon, 1992).

Martha Stewart and the executives of WorldCom did not consider business ethics such as fairness and integrity while getting involved in their respective scandals. Martha Stewart compromised the integrity of the business industry by participating in illegal acts. This causes the lay man, who does not rub shoulders with the big company executives, to believe that there is a bias in the business industry. That is favors the connected to the common man. Those media celebrities get to have some perks. The executives of WorldCom did not provide a win-win situation for its shareholders. They satisfied themselves at the expense of their shareholders. This leads to a belief that one cannot place their pension and hard earned cash in a company as they could easily use it for their benefit and leave the shareholder with huge losses.

References

Colvin, Geoffrey. (August 8, 2005). The Other Victims of Bernie Ebbers’ Fraud. CNN Money Retrieved April 24, 2014.

Grigoriadis, Vanessa. (April 1, 2012). I Just Want To Focus On My Salad. New York. Retrieved April 24, 2014.

McClam, Erin. (June 4, 2003). Martha Stewart Indicted in Insider-Trading Scandal. Deseret News. Retrieved April 24, 2014.

Romero, Simon; Atlas, Riva. (July 22, 2002) WorldCom’s collapse: The Overview; WorldCom Files For Bankruptcy; Largest U.S case. The New York Times. Retrieved April 24, 2014.

Report of Investigation by The Special Investigative Committee of the Board of Directors of WorldCom, Inc. SEC. Retrieved April 24, 2014.

Solomon, Robert C. (1992) Ethics and Excellence: Cooperation and Integrity in Business. Oxford University Press.