The WorldCom Case Study - Ethical Considerations
Added on 2020-10-22
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The WorldCom case study
TABLE OF CONTENTSQUESTIONS ..................................................................................................................................11. Ethical considerations..............................................................................................................12. Place protection for ensuring stakeholders benefits ................................................................13. Ethical pros and cons of banking ............................................................................................24. Usefulness of distinguishing between lying and merely fudging ...........................................25. Decision making situation .......................................................................................................26. Glass steagall act and its implications ....................................................................................37. Sarbanes oxley act and financial discrepancy issues of WorldCom .......................................3SUMMARY ....................................................................................................................................4Project 2...........................................................................................................................................6REFERENCES ...............................................................................................................................9
QUESTIONS 1. Ethical considerationsHiding and misinterpreting information: The company followed the ethical dilemma ofhiding crucial information. On basis of this, the company's decision to loan executives moneycan be considered as full of dilemma from the ethical perspective. The decision seems rightsfrom the perspective of profit and ensuring self benefit. However, from the ethical and long termperspective, it cannot be justified as the correct action. The company is putting the money at riskwhich belongs to the property of public and stakeholders. Thus, company is liable to inform allassociated participants regarding the decision and associated risk. Hiding information: From ethical perspective, it is the legal right of the public to knowthat where their fund is being used and at what extent it is exposed to risk (Miller and Jentz,2017). However contrary to this, loan was given and truth was hidden from the people. It waspossible that if people were informed about risk they would have opposed to the decision. Thus,to avoid such situation company made the decision without informing other participants andprovided loan to executives. 2. Place protection for ensuring stakeholders benefits In this, the company hide some crucial information from public. They violated rules andregulations which are required to follow in financial framework. Due to this, many things did notgo well. Moreover, there are several factors which contributed to this. At first, the organisationwas not ready to grow at such fast rate. Thus, when rapid acquisition occurs it resulted in poorcorporate governance, ineffective financial system and liberal interpretation of accounting rules.As a result despite having great success scope and opportunity through acquisition, WorldComfails to achieve its growth targets for long term. However, there is no need to place additionalprotection for the stakeholders because it is strongly believed and is well known fact that onlyhigh risks can give high rewards (Yeoh, 2015). Thus, there is no need to keep more security forassuring the benefits of stakeholders because otherwise it will challenge the fee spirit of thefinancial market. 1
3. Ethical pros and cons of banking One of the advantage of banking firms giving special privilege to their clients is that itopens up an option for the small investors as well. Since it is quite difficult for the smallinvestors to compete with the large and dominating groups, thus this attempt by banking firmscan give an opportunity to small investors as well (Johnson, McLaughlin and Haueter, 2015).However, ethically it can also be considered as disadvantage because it does not allow an equalopportunity for all the investors which are participating in hot IPO auctions. However, there hasbeen difference between ethics and law. The companies can decide at their own that to whichinvestor they want to favour. From legal aspect it cannot be considered wrong or unacceptablebut in terms of ethics many investors can consider this as unethical and inappropriate. It can alsocreate dissatisfaction among other participants of the auction. 4. Usefulness of distinguishing between lying and merely fudging The lie made by Jack Grubman can be considered as an action of self marketing. Whilepresenting the transaction and deals among audience and public it is illegal and unethical to hideor misinterpret the truth. Thus, the most appropriate way chosen by the organisation and theirassociates is to use fudging technique. It allows company to modify the facts so that it appearsas valid or true information and company can protect itself from the negative and illegalpublicity. The action of Jack Grubman is an act of fudging instead of lying. It was clearlyindicated that actions of Jack were an attempt to hide the fault and to prove that the decisions andactions which were made were not intended to hide from people or to cause losses. Thus, fromthe brand and image perspective fudging is taken as the most safe and effective approach whichis used by the organisation (Markham, Gabilondo and Hazen, 2017). 5. Decision making situation When Sullivan asked to extend the reporting time, the condition was very critical forevery team member. Each of the team member made significant efforts to discover the hiddentruth and it was quite sure that revelations will create a blunder for the company. However, withadditional time period of one month, it was assumed that Sullivan will make attempts to preventthe company from bankruptcy. However, her strategies were not known because none of the2
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