Tuesday, October 6, 2009

Leadership, Morality, and The WorldCom Scandal

How the CEO’s Screwed WorldCom!
A Dr. Seuss Inspired Poem About the Collapse of WorldCom

The employees at WORLDCOM were an ethical lot,
But the CEO, a man named Bernard Embers, was NOT!

The CEO had a bit of a problem, one season,
Now, please don’t ask why. No one quite knows the reason.

It could be that his head wasn’t screwed on quite right,
It could be, perhaps that his shoes were too tight.

But I think that the most likely reason of all,
May have been that his heart was two sizes too small.

But, whatever the reason, his heart or his shoes,
He was getting himself into some terrible news.

Ebbers, you see, had a firm business pitch,
He bought tons of WORLDCOM stock, and it got him quite rich.

But from 1998 to the spring of 00,
The telecom industry took a pretty hard blow.

Things weren’t looking good… and if you can’t take a hint,
WORLDCOM even had to abandon its proposed merger with Sprint.

The stock took a nosedive, boy, was it declining!
Top execs complaining, commiserating, and crying…

What to do? What to do? With our once top-notch firm?
Their answer would lead to the end of their term.

Ebbers, he had other businesses, you see,
Timber, yachting, construction… to name just three.

And when WORLDCOM’s future wasn’t looking so bright,
He pleaded the WORLDCOM Board of Directors with all his might.

He wanted more money… more MONEY! He said!
Not to help WORLDCOM, but these other businesses, instead!

But before this blew up in Ebbers’ face… KA-BOOM!
There were some other dodgy things going on in the accounting room.

The CFO, Sullivan, along with Myers and Yates,
Had less than their share of ethical traits.

By inflating revenues and underreporting costs,
These three men contributed to all WORLDCOM lost.

They made the company appear more profitable than it was,
Confusing stockholders, employees, and creating quite a buzz.

Surely someone would notice this… surely they would!
But a man named Jack Grubman was up to no good.

As an analyst for WORLDCOM, and Ebbers’ good friend,
Grubman approved too much money to lend.

Though he lent too much out, and took too little in,
Grubman still recommended WORLDCOM stock to buyers… what a sin!

But for Ebbers, Grubman, Sullivan, Myers, and Yates,
The punishment for their criminal actions awaits…

Just when these guys thought they were too hot to handle,
An internal auditor… Cynthia Cooper… brought forth the whole scandal.

Some key players were sent to jail, others quickly retired,
Some just got the Donald Trump tag line, “You’re fired!”

But no matter the punishment, we can only hope,
It will prevent further scandals of such a wide scope.

The moral of WORLDCOM’s demise is quite clear,
Honest business practices will bring the most cheer.

For business and ethics go together like a bucket and pail,
If you don’t get that, they’ll throw you in jail!

Leadership, Morality, and
The WorldCom Scandal

While studying abroad, my friend and I wrote the poem “How the CEO’s Screwed WorldCom!” as part of a presentation for one of our classes. I have included it in this post in case you are not familiar with the incident. The poem provides a brief, somewhat humorous depiction of the collapse of WorldCom and serves as the foundation upon which I built the following analysis regarding morality and leadership.

The fall of an empire like WorldCom has always been particularly interesting to me because of the number of players involved in the scandal. How were top executives able to continue such corrupt practices for such a long time without public exposure? Surely other employees besides Cynthia Cooper knew of WorldCom executives’ corrupt actions? Why didn’t anyone speak up?

In raising these questions, I started to consider the concept of morality and its role in both leadership and corporations. According to Barnard, executives are responsible for the creative function of leadership, meaning they should apply both personal and organization codes to their leadership style in order to be effective. In theory, if all of a leader’s personal codes reflect moral values, he or she would be able to lead in such a way that enables the transfer of such codes onto the entire organization, creating what Goodpaster and Mathews refer to as a corporation with a conscience. If only that were the case for WorldCom…

In my analysis of morality and the WorldCom incident, none of the executives involved in the scandal led with any sense of morality. Instead, they used legitimate and coercive power to essentially bully knowledgeable employees into “blind” obedience through threat and other fear inducing tactics. It is not until Cynthia Cooper, WorldCom auditor and infamous whistleblower, takes it upon herself to investigate the suspicious practices and expose the scandal that morality even appears.

If, as Barnard, Goodpaster, and Mathews suggest, morals are an integral component of effective leadership, Cynthia Cooper seems to be the only leader who emerged from the WorldCom incident. WorldCom’s’ top executives’ exhibited no morality because their actions were not conducted for the overall good of the organization, and no other WorldCom employees who knew of the underhanded practices did the “right thing” and spoke out against the corruption.

In thinking about morality in regards to the WorldCom scandal, I wonder just how important the possession of moral values is for a leader and/or follower to be effective? Can you be an effective leader and/or follower without morals? Are consequential inducements such as the Sarbanes-Oxley act crucial for the assurance of moral leadership in organizations? Would morality even exist in corporations if such inducements were not in place today?

These are just a few questions that came to mind as I was creating this post, but other interesting things to consider in application to the WorldCom incident include morality and Barnard’s “zone of indifference” and the role of morality in groupthink.

1 comment:

  1. As to your question on whether you can be an effective leader/follower without morals, I think it can happen. The topic has been mentioned before in readings and in class, but Hitler to some degree was an effective leader. He rose to power, rallied the German people after their defeat in WWI and set out to conquer Europe. He was a ruthless dictator without morals and yet he lead Germany out of their depression. However his reign did not last which I think holds true for all leaders without morals. They will eventually fall out of power. I think people want a leader with morals because they want somebody who will show them empathy and compassion. They want support and encouragement not to be brought down or become involved in corrupt activities.


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