WorldCom Accounting Scandal Case Study

Corporate scandals are therefore just a result of unethical practices within the organization. Very many organization have suffered from the corporate scandal that has been propagated by different individuals within the corporates. The heads of the corporates are the ones who bear the blames since the head should be accountable enough to the public for anything that goes on within the corporation. WorldCom is one of the corporates in the United States of America that has been documented as the corporate with one of the biggest scandal to have ever been witnessed in the history of the United States of America. WorldCom, a communication company that was located in Clinton. WorldCom fell on this expectations which resulted in a fraud to be designed that would serve to hide the reality from the public eyes.

At this point in the 2000's the industry started to decline and this acted against the goals of WorldCom telecommunications. As a result of the declining business, WorldCom was faced with some economic hardships. The company had to take job cuts, its stock value declined from sixty US dollars to just 2. 64 US dollars. This mismanagement of the accounting system of the company caused a lot of harm to the company and those who had invested in WorldCom. By this move, the directors of WorldCom and relevant officers failed to let the shareholders know the true financial position of the company so that they could make a decision of either selling their WorldCom shares or staying in the company hence breaching the duties they were entrusted with in the company.

As a result of the bankruptcy filing by the directors, the shareholders made a lot of losses which led to court battles between the shareholders and the company directors. There are several lawsuits that have been filed against the directors and officers of WorldCom Telecommunications Company. The lawsuits filed by the shareholders and investors of WorldCom have had a positive outcome to them. Their acceptance to pay the eighteen million dollars from their pockets has raised eyebrows because it shows that they understood what they were doing in the build-up to the accounting scandal. In the United States of America, the director's responsibility to take care of the shareholder's concerns in their respective companies have been put under harsh investigation by the relevant authorities after what happened in the Enron.

After the bankruptcy of WorldCom Telecommunications Company, the court of law was tasked to ensure that shareholders were duly compensated for the loss they incurred after the accounting fraud. As it is known, companies would have taken care of charges laid upon its executives in case of fraud but when it came to WorldCom accounting scandal, the executives took care of the charges themselves. The amount paid by the respective directors as directed by the court would take amount to about twenty per cent of each director's personal known wealth and a certain percentage of the director's private wealth would also be considered. For instance, "Stephen Teel spent twenty-three years working for MCI, investing all of his 401(k) contributions in company stock.

After the massive fraud that brought down WorldCom -- which took over MCI -- and led to the collapse of its stock, his one million dollars retirement nest egg was worth less than $1,000"(NOE 2006). Teel had invested in WorldCom with the hope that he will use the money during his retirement has he had planned for an early retirement. This dealt him a blow as he had to reconsider other options after the great accounting scandal of WorldCom Telecommunications Company. Fifty-one-year-old John Mosley was another victim of the WorldCom accounting scandal although his situation was different from that of Stephen Teel. On the part of the company, the accounting fraud resulted in the company being put into bankruptcy. The hefty loss of eleven billion US dollars put the company on the negative side of the stock market has the stock price drastically reduced.

The company that was once a giant company in the United States of America would hence be considered as a failed company. To wrap it all, it was everybody's shock when the mega-scandal in WorldCom Telecommunications Company was revealed by an internal auditor. The practices that were done by the executives of the company were very unethical as they served their personal interests and not the company and public interests. " CNNMoney - Business, Financial and Personal Finance News, 13 July 2005, money. cnn. com/2005/07/13/news/newsmakers/ebbers_sentence/. "In Re WorldCom, Inc. Securities Litigation, 293 B. wharton. upenn. edu/article/what-went-wrong-at-worldcom/. Crawford, Krysten. "Ex-WorldCom CEO Sentenced to 25 Years in Prison - Sep. "WorldCom Investors Still Seeking Compensation. " ABC News, 6 Jan. 2006, abcnews. go. com/Business/story?id=586378&page=1.