Ethics and Governance in Business: A Case Study of WorldCom

This report discusses the ethical issue of business affecting the durability of a firm, using the case study of WorldCom. Theories of ethical decision making, AAA Model of ethical decision making, and APES 110 are discussed. The subject is Business Ethics, course code and name are not mentioned, and college/university is not specified.

Running head: ETHICS AND GOVERNANCE
Ethics and Governance
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Executive Summary
Present report focuses on the ethical issue of business which is affecting the durability of a firm.
Undertaking any kind of illegal mean is strictly prohibited in business at it hampers the
consistency of a firm. In accordance with the case study, WorldCom, the most famous company
in the entire telecommunication industry is currently facing crucial ethical dilemma. Amplified
cost of rental is posing major threat for the company to maintain their economic stability. It is
quite evident from the case study that, due to the fraudulent mean of some of the employees is
increasing the issue in a rapid manner. Therefore, prompt action is needed to be taken as this
issue is creating obstruction for WorldCom to raise their future capital. Utilitarian theory focuses
on effective action that can bring greater benefit for mass range of people. Thus, this theory is
needed to be applied in the organizational context in order to give the company with greater
benefit by mitigating the issue promptly. AAA model is one of the most significant frameworks
which supports in initiating the entire ethical decision making process in a systematic manner.
APES 110 is also a vital framework which provides certain principles for those staffs who are
working as accountants in a company.

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Table of Contents
Introduction:....................................................................................................................................3
Part:..................................................................................................................................................3
1. Identifying and discussion of the theory of ethical decision making:.....................................3
2. Explanations of the actions that both David and Buddy can take:..........................................4
3. Justification behind the theory:................................................................................................4
Part B: 8...........................................................................................................................................5
AAA Model of ethical decision making:.....................................................................................5
Discussion:...................................................................................................................................8
Part C:..............................................................................................................................................9
Discussion of APES 110:.............................................................................................................9
Conclusion:....................................................................................................................................11
Reference List:...............................................................................................................................12

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Introduction:
As the illegal means in business is rapidly increasing, the need of integrating ethics in
decision making process is also accelerating. Ethics can be considered as a set of moral
principles which guides the people towards proper direction. Ethical decision making can be
defined as the process of integrating the moral values into commercial course of action.
According to Crane & Matten, (2016) business ethics is one of the most significant tools, behind
used in recent times for integrating moral principles in business which is the key of running
business with utmost efficiency. As per the case study, WorldCom, the major telecommunication
company is encountering with financial threat due to increased cost of telephone rentals.
David Myers, the Financial Controller of the company is highly vulnerable towards
leading such mischievous means that is ultimately leading the company to face immense
financial loss. On the other hand. David, an extremely loyal employee of WorldCom is making
multiple plans in order to get the company out from the issue. Present paper will highlight the
ethical decision making in the context of WorldCom. Theories of ethical decision making will be
discussed in the paper. AAA Model of ethical decision making will also be highlighted. Finally,
this paper will put forth the discussion of APES 110 in order to provide David with requirements
of this framework.
Part:
1. Identifying and discussion of the theory of ethical decision making:
Ethics is considered as one of the most significant branches of moral principles that deal
with the standard of right and wrong along with code of conduct of human behavior. As
discussed by Ferrell & Fraedrich, (2015) having strong ethics in business is highly required for

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safeguarding the business assets and thereby create a fair working system without amidst any
kind of illegal means. Utilitarianism theory is one of the most significant aspects of business
ethics which deals with the application of moral values that can bring greater happiness towards
the organization. This is one of the most significant forms of consequentialism, which is highly
focused on determining the right from that of wrong. According to this theory, it is important to
act in such a manner which can support in producing greater happiness among mass range of
people. This is the most common approach, being highly used in business for attaining greater
benefit (Trevino & Nelson, 2016).
2. Explanations of the actions that both David and Buddy can take:
Bowie (2017) highlighted that according to Utilitarianism theory, business must be
operated in an ethical manner in order to get immense benefit. Being the most loyal employee of
WorldCom, David must take significant initiatives in order to diminish the unethical practices
from the workplace. It is important for David play the role of whistle blower in order to keep his
boss about the illegal means at the workplace and the person, who is responsible for executing
the illegal way. At the same time, he should also offer the boss with multiple plans to cut the cost
of telephone rental and thereby improve the financial condition of the company. In the context of
utilitarianism approach, the act of whistle blowing is highly significant as it supports in
providing immense pleasure to the business.
3. Justification behind the theory:
According to the cases study, utilitarianism approach is needed to be applied in terms of
lowering the threat, being faced by WorldCom in contemporary times. As highlighted by
Pearson Pearson (2017) application of this approach, can serve the employer of the organization
with the ability to align the issue with that of strategy, which is the key of running business in a

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cost effective manner. In addition to that, utilitarianism approach has been chosen at it can
provide WorldCom with a fundamental purpose of decision making. This is the way, through
which highly ethical decision can be taken by considering several aspects such as broader picture
of decision along with its impact on internal functionality of WorldCom. Moreover, Shaw (2016)
shaded this theory of business ethics can provide multiple tough choices for WorldCom, from
which they can be able to mitigate the issue in a timely and cost effective manner. Additionally,
with the assistance of this approach, both positive and negative aspect of decision can be
measured.
Part B: 8
AAA Model of ethical decision making:
Weiss (2014) showed that ethical decision making is a complicated process which
requires multiple steps. American Accounting Association (AAA) is one of the most important
models, which support in taking ethical decision in a comprehensive manner. There are multiple
steps of AAA Model of ethical decision making which are as follows:
Step 1- Identifying the main factor of the case:
Initially, it is imperative to understand the main factor which is the most important factor
in terms of taking effective decision. Determining the key factor is the major way of evaluating
te issue, faced by a company. Identification of key issue is highly imperative factor for exploring
the main basis that is leading to conflict of interest (Hoffman, Frederick, & Schwartz, 2014). By
taking the case study into consideration, it can be said that, exploring the key issue faced by
WorldCom is the initial step of promoting ethical decision making. The company is encountering
with the issue related to higher rental of the telephone. As an extremely loyal employee, David

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should explore the base of such unethical practices at workplace, the factors causing such higher
cost of rental and the responsible person behind such illegal means.
Step 2- determining the ethical issue in the case:
Assessing the ethical issue in the prevailing case is the second important step of ethical
decision making model. It is imperative to define the ethical basis of the issue which is very
much needed to understand every aspect of an issue (Medeiros et al., 2017). Based on the case
study, increased cost of line rental is the prevailing issue of WorldCom- the giant in
telecommunication industry. The ethical issue in this case is that, there is an illegal practice
which is causing the issue and is affecting the annual revenue of the company. The highline cost
of rental is creating strong barrier for WorldCom to raise their capital in future.
Step 3- Identifying the relevant factor:
This is the third step of ethical decision making which focuses on the affected parties of
the issue. It is imperative to identify both the direct and indirect stakeholders, who are associated
with the issue. This is the way, by which the impact of issues on the affected parties can also be
understood (Davies, 2016). According to the case study, WorldCom is facing major financial
problem due to higher cost of rental. This is affecting the financial stability of the company. In
this case, the owner of telephony infrastructure is the direct stakeholder of WorldCom, who is
being affected by the higher cost. In order to mitigate the issue, WorldCom might leave the
company which can also affect the rate of profitability of the owner of telephony infrastructure.
The employees are one of the key internal stakeholders of a company, who holds a significant
role of gaining success from business (Shapiro & Stefkovich, 2016). It is quite evident from the

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case scenario, that the accountants of WorldCom are responsible for executing this illegal means
which is resulting in major financial loss for the company.
Step 4- Alternative courses of action:
In this step, it is required to make a list of multiple options before taking final decision.
This is the mode of choosing the best judgment and thereby diminish the issue in a timely and
cost effective action. The durability of each of the solutions must be analyzed before applying
one of them in the final decision making process (Dane & Sonenshein 2015). Being the financial
controller and highly loyal staff of WorldCom, it is imperative for David to make a list of
multiple options to the employers in terms of mitigating the prevailing issue. David can execute a
strong code of conduct for the entire organization, generate the consequences of the issue, and
create the organizational culture in such a manner, which can support in showing welcoming
attitude to the employees who show ethical behavior and creating a system of check and balance
to avoid any kind of mischievous behavior in the workplace (Lehnert, Park & Singh, 2015).
Step 5- Analyzing the best course of action:
Out of all the solutions, it is imperative to choose the best course of action, which is
highly beneficial for the company. This is the way, through which best possible option can be
integrated. Cooper, (2010) observed that there are multiple ways, through which all the probable
solutions can be measured. Harm test is the best option in this context, which deals with the
analyzing the extent to which an option is less harmful than that of the others. Defensibility test
is another major way of measuring all the options. This is the mode of defending the best option
and placing them towards the authority. Virtue test is considered as one of the best ways of

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measuring the best possible option. Through this way, the benefits of each solutions is being
measured (Schwartz, 2004).
Step 6- Result of each course of action:
This is the 6th step of AAA model of ethical decision making. In this way, the probable
outcome of all the course of action can be assessed before applying the best technique. In-depth
assessment of the result can serve the higher authority of WorldCom with the ability to initiate
the process of ethical decision making in a timely and cost effective manner. Thus, it is
imperative for David to measure the result of all the possible courses of action.
Step 7- Making final decision:
Based on all the alternative options of ethical decision making along with its benefit, it is
imperative to choose the best option that can give the company with a highest benefit. This is the
final steps of ethical decision making which deals with in-depth review of all the other steps.
This step also requires taking strong cautions based on the problem and changing the
organizational structure and policy which is the key of mitigating the issue.
Discussion:
Based on all the steps of AAA model of ethical decision making, it is imperative for
David to put ample stress on 4th step that is suggesting alternative course of action. This is the
mode of unfolding multiple ways of solving. Out of all the possible options, David should
execute a strong code of conduct throughout the organization. Code of conduct can be referred as
a strong organizational culture which deals with how the employees can behave in an appropriate
manner. Being the accountant of WorldCom, it is the prime responsibility of David to take care
towards the financial aspects. Determining code of conduct can serve David with the ability to

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generate a positive behavior among all the accountants in order to undertake immediate ethical
course of action. In addition, strong code of action can also support in reinforcing the culture and
value of WorldCom.
Part C:
Discussion of APES 110:
APES 110 is one of the major code of professional ethics, which has been designed
especially for the professional accountants. It is the prime responsibility of the members of
Australia to follow such code of conduct while dealing with any kind of ethical issues of
business. Honesty and integrity are two of the most significant code of conduct which are
needed to be followed by the members of CPA Australia. This is the fundamental principle of
this code of conduct which deals with straightforwardness in the business relationship (APES
110., 2018). As an illegal practice is being executed in WorldCom which is resulting in increased
cost of rental and leading the company to face major financial loss, it is imperative for David to
play the role of whistle blower and inform the higher authority of WorldCom regarding the
treacherous mean, which has been executed in the company.
Objectivity is another vital principle of APES 110 code of ethics for professional
accountants. As per this principle, it is imperative to avoid any kind of biases while making
judgment as it can hamper the consistency of ethical decision making. David must make a
healthy interaction with Buddy in order to get the things, without making any kind of pressure on
him. Professional competence and due care, too is a vital principle of APES 110 code of ethics
for professional accountants which focuses on intense skill and knowledge among the members
of CPA Australia. According to this principle, it is the prime responsibility of the professional

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accountants like David to strengthen his skill in order to modify the organizational structure and
thereby generate positive behavior among the all the employees to avoid any kind of
mischievous practices at workplace (Schwartz, 2016). This principle can also lead the staffs like
David to keep the organizational structure and culture up to the mark which can support in
establishing a strong standard throughout the workplace. Professional behavior is the key
principle of APES 110 code of ethics for professional accountants which is concerned with
amenableness with all the prescribed rules and legislative framework. Undertaking any
mischievous means is highly unethical in business, it is imperative for David to consider the
issue of increased cost of rental from a legal perspective and take legal action against the person,
who has executed the illegal means in order to create harm for the company (May et al., 2014).
As David is holding a senior position in the company, it is his responsibility to influence
the attitude among the employees along with the practice which can be beneficial for the
company. However, there are certain threats, which David might face while executing his course
of acting. As he is playing the role of whistle blower and uncovering the illegal practices,
happening in the company, he might face threat of replacement. He might also face self-review
threat while determining appropriate accounting system (Valentine et al., 2014). Therefore, it is
imperative for David to safeguard himself by employing the organizational structure. Ethics and
conduct program must also be executed at workplace for the sake of having strong internal
control.

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Conclusion:
Based on the discussion, it can be concluded by saying that determining professional
code of conduct in business is highly significant in order to run business with utmost proficiency.
Ethical decision plays a key role in lowering any impending issue of business and take action
accordingly to mitigate the issue in a timely and cost effective manner. According to the
scenario, WorldCom, the giant in telecommunication is facing major threats due to increasing
cost of rental. This is encumbering the financial context of the firm. Therefore, it is vital to take
strong and proactive action in order to lessen the impact of the issue. Utilitarianism approach is
highly required in this case to provide benefit of the entire organization. AAA model of ethical
decision making must also be implemented in WorldCom for getting multiple solution to the
problem. A strong code of conduct is needed to be established in the organization for reinforcing
positive behavior among the employees in terms of avoiding the issue. Honesty and integrity
must be possessed by the employees who is playing the role of whistle blower in terms of
keeping the higher authority of WorldCom informed regarding the ongoing issue that is affecting
the future capital of the firm.

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Reference List:
APES 110. (2018). Retrieved from
https://www.cpaaustralia.com.au/professional-resources/accounting-professional-and-
ethical-standards/apes-110-code-of-ethics-for-professional-accountants
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Education.
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decision-making literature: Boundary conditions and extensions. Journal of Business
Ethics, 129(1), pp.195-219.

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May, D.R., Li, C., Mencl, J. & Huang, C.C., (2014). The ethics of meaningful work: Types and
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variable relationships. Journal of Business Ethics, 124(3), pp.509-526.

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