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WorldCom Scandal, Research Paper Example

Pages: 1

Words: 324

Research Paper

The article reveals that WorldCom’s CEO Bernie Ebbers forced his CFO Scott Sullivan to cover debts and manipulate accounting statements in order to meet Wall Street’s expectations as well as protect his wealth most of which was tied to WorldCom’s stock. (Farrell, 2005). Any organizational failure is also the failure of organization’s board to do its job properly and WorldCom’s board was no exception. One of the decision-making traps the board might have fallen into is the over-confidence trap. Ebbers had proven himself to be an ambitious guy and had a track record of making successful bets which might have given the board a blind trust in Ebbers’ leadership. The board might also have fallen into status quo trap that since things had worked well so far, there is no reason why they won’t in the future. It may also be that the board at WorldCom was just a formality and Ebbers never really took board’s opinions into account. In order to save their jobs, the board members didn’t consider it worthy to oppose Ebbers. The concept of groupthink is especially relevant to board members because they want to preserve harmony as well as their own jobs which often come with perks and little responsibilities. It is especially true in case of charismatic and powerful CEOs. Board decisions are usually made in a democratic manner, thus, individual board members strive to avoid being in the minority and lose the goodwill of the CEO.

There were several communication barriers that contributed towards WorldCom’s fall. The first may have been language as no one in the board might have been well versed in issues of accounting. The second may have been emotion if the board members also had close friendships with Ebbers which made them relaxed in terms of monitoring the legal and ethical aspects of management’s actions.

Reference

Farrell, G. (2005, March 16). Ebbers’ luck runs out in sweeping victory for feds. Retrieved October 13, 2012, from http://usatoday30.usatoday.com/money/industries/technology/2005-03-16-ebbers-cover-usat_x.htm

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