Worldcom Case Study
WorldCom Case Study: Lack of Leadership, Lack of Ethics
Emily Fearnow
ORG 500- Foundations of Effective Management
Colorado State University – Global Campus
Dr. Cheryl Lentz
May 15, 2011
WorldCom Case Study: Lack of Leadership, Lack of Ethics A multitude of choices made by executives at WorldCom led to the ultimate demise of the company as it was previously known, the employees and their livelihoods’, and the trust of the American people. In a time when corporations fail to set ethical standards and provide transparency to investors, how do we change corporate culture on a national level? By analyzing choices made to improve stock prices and company image that ultimately result in failure-- we can guide leaders towards long-term success and corporate stability.
The Growth of WorldCom The WorldCom business began as a small long distance company providing service at a discounted rate. WorldCom grew through acquisitions and mergers throughout the 1990’s, becoming the second-largest long distance phone company in the United States. By acquiring certain strategic companies as MFS Communications and MCI, WorldCom set itself up as a supplier of Internet service and corporate and household telephone service. As WorldCom acquired corporations, the board of directors grew to include executives from these corporations. This action puts WorldCom in a situation without outside input and oversight. When companies merge and acquire many smaller companies with different computer systems, different management styles, and different cultures the transition can be a rocky one. Differences in corporate cultures and values are often one of the major grounds for mergers to fail (Tichy, 1997). In 1999 WorldCom made a concerted effort to purchase Sprint, however regulators in the U.S. were concerned with the formation of a large telecom company. When this merger was unsuccessful it was noted that the company needed focus from its leadership.
Emily Fearnow
ORG 500- Foundations of Effective Management
Colorado State University – Global Campus
Dr. Cheryl Lentz
May 15, 2011
WorldCom Case Study: Lack of Leadership, Lack of Ethics A multitude of choices made by executives at WorldCom led to the ultimate demise of the company as it was previously known, the employees and their livelihoods’, and the trust of the American people. In a time when corporations fail to set ethical standards and provide transparency to investors, how do we change corporate culture on a national level? By analyzing choices made to improve stock prices and company image that ultimately result in failure-- we can guide leaders towards long-term success and corporate stability.
The Growth of WorldCom The WorldCom business began as a small long distance company providing service at a discounted rate. WorldCom grew through acquisitions and mergers throughout the 1990’s, becoming the second-largest long distance phone company in the United States. By acquiring certain strategic companies as MFS Communications and MCI, WorldCom set itself up as a supplier of Internet service and corporate and household telephone service. As WorldCom acquired corporations, the board of directors grew to include executives from these corporations. This action puts WorldCom in a situation without outside input and oversight. When companies merge and acquire many smaller companies with different computer systems, different management styles, and different cultures the transition can be a rocky one. Differences in corporate cultures and values are often one of the major grounds for mergers to fail (Tichy, 1997). In 1999 WorldCom made a concerted effort to purchase Sprint, however regulators in the U.S. were concerned with the formation of a large telecom company. When this merger was unsuccessful it was noted that the company needed focus from its leadership.
References: Beresford, D.R., Katzenabach, N.d., & Rodgers Jr., C.B., (2003). Report of the Investigation by the Special Investigative Committee of the Board of Directors of WorldCom, Inc. Retrieved from http://www.sec.gov/Archives/edgar/data/723527/000093176303001862/dex991.htm Kaplan, R.S. & Kiron, D., (2007). Accouting Fraud at WorldCom. Retrieved from http://cb.hbsp.harvard.edu/cb/pl/7723018/7722997/50bd1c0cb65545f9070718101e404bd6 Kotter, J.P. (2008) A sense of urgency. Boston, Mass.: Harvard Business Press. Robbins, S.P. & Coulter, M. (2009) Management (10th ed.). Upper Saddle River, NJ: Pearson Prentice Hall Sinek, S. (2009) Start with why: how great leaders inspire everyone to take action. New York, NY: Penguin Group. Tichy, N.M. (1997) The Leadership Engine: how winning companies build leaders at every level. New York, NY: Harper Business. Wo