Corporate Governance and Ethics Case Study - WorldCom Company

Running head: CORPORATE GOVERNANCE AND ETHICS
CORPORATE GOVERNANCE AND ETHICS
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CORPORATE GOVERNANCE AND ETHICS
Executive Summary
The aim of this study is to understand the different theories of ethics along with the AAA
model and APES 110 model and determine show they help to guide or inform different
ethical outcomes. The following case is that of WorldCom Company who have faced ethical
and fraudulent charges due to the actions that have been taken by them in changing their
financial statements.

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Introduction
The case study is based on the events that have been shared by Cynthia Cooper who
was an internal auditor at the company WorldCom and was able to uncover a fraud that
would shut down the company. The Chief Financial Officer (CFO) of WorldCom, Scott
Sullivan discussed the issue with David Myers, the Financial Controller of the company
before embarking on a fraudulent activity regarding the vulnerability of the accounts which
would finally bankrupt the company. The money that is paid by WorldCom to other
companies for the use of the telephone infrastructure is known as line rental cost. The
increase in this line rental cost meant that there was a decrease in the earnings of the
company which would damage the share price of the company and there would be an
increase in the cost of future capital rising. Scott instructs David to change the numbers so
that there would be a reduction in the line cost expense and it would be balanced with the
earnings of the company. To make this changes they would need the help and support of the
inner circle of the company who actually makes the changes in the accounting entries. For
this they approach Buddy who is the accounting director and also his friend whom he trusts.
Though uncomfortable with the instruction, they followed through with it since they had to
be loyal to their boss and save their job as well. This case depicts the change that would have
occurred if these people would have taken the action and finally landed in jail. If they had
trusted their own conscience and supported their ethical thinking they would have been in a
much better situation. In the following sections different scenarios of the case would be
discussed on the basis of ethical and fundamental theories.
Part A
The theories that would be used for David and Buddy are the Utilitarianism and
Egoism respectively. Utilitarianism theory states that an action is good if it results in the

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benefit and the satisfaction of many people who would have be affected by the action (Hayry,
2013). This means that any action is justified if it is done for the benefit of a large number of
people (Mill, 2016). Egoism theory states that an action is good if it benefits the person’s
self-interest even at the expense of others (Arnold, 2014). This theory takes into
consideration the fact that thinking about personal interest is a moral action. The theory is
depicted as being self-centred and only performs those actions which are done to maximize
the personal interests (Levit, 2014). Both of these theories explains that an action is
considered right or wrong by seeing the consequences that is derived from those actions. The
actions are done to satisfy either personal needs or the needs of others but both these actions
might be wrong or even right and that depends on the results that is derived from the action.
The actions of David have been aligned with the Utilitarianism theory because the
action that he was about to take would result in the benefit of the whole company as primarily
being thought by them (Mulgan, 2014). When Scott instructed him to change the numbers so
that they might not face bankruptcy, he accepted the instructions because he thought that this
action would save the company from getting bankrupt and would save the job of the people
who are working in the company. Moreover, he was a loyal employee who did not want to do
anything that would harm the future of the company. This is why the theory applied to him
because he took his actions thinking about the benefit of the company. On the other hand, the
actions of Buddy have been aligned with the Egoism theory because the action that he was
about to take would be simply based on his personal interest (Ivaniva & Bikeeva, 2016).
When David told him about the task at hand, David was uncomfortable to do so because he
knew that it was illegal. However, he finally accepted because he thought about himself and
derived that since he was the sole earning member of his family, not agreeing to do the task
would mean that he would be laid off from the company and he would have to find another