Question

Prompt
Your case study should answer the following prompt: What ethical framework should be utilized when setting appropriate standards of conduct for

professional accountants in order to promote ethical values and decision making? Specifically, the following critical elements must be addressed:

Background
What company is the subject of the case? Why did you choose this company/ethical situation? What ethics violations were discovered?

Ethical Violations

Company: WorldCom

Answer 1

What Went Wrong at WorldCom?

The Growth Strategy

WorldCom’s strategy was growth through acquisition , which was a complex and often time consuming effort. Performing mergers and acquisitions too closely to one another can cause problems that may not be overcome easily, if at all. Shareholders are often the ones who get the short end of the deal when companies continue this type of strategy. (Brown, 2004). The struggle when acquiring a new company is an attempt to continue the same, or better, level of customer service with a seamless transition of accounting practices and technologies. Inherent in the process is an increase of expenses to make the two companies function as one organization behind the scenes and to customers. Most often this cost is not considered in the purchase price.

This was the case that WorldCom faced as they made major deals to acquire larger organizations. These organizations gave WorldCom a greater share of the market and strengthened their core competencies but larger does not necessarily equate to greater profitability. The case study by Moberg and Romar (2003) points out WorldCom’s encounter with creative accounting to hide the true costs emerging in future quarters after an acquisition.By not giving more effort and time to smoothing out the problems between services, technology, and business practices with the new organization, WorldCom was forced to figure out other ways to fix the failing stakeholder value. Their answer was to acquire another, even larger, company,thus simultaneously acquiring another opportunity for creative accounting.

What ethical framework should be utilized when setting appropriate standards of conduct for professional accountants in order to promote ethical values and decision making?

Values relate to effective leadership and ultimately drive our behavior. Values also influence our atti

tude. The values discussed in the report are:

• Wisdom and Knowledge
• Self Control
• Justice and fair guidance
• Transcendce
• Love and Kindness
• Courage and Integrity

These values are intertwined and affect our ability to fairly evaluate a situation. Difficult

decisions surrounding the allocation of limited resources leave some individuals and groups with

less courage and integrity than they would prefer.Kerns, Charles D. (2003) says, “The redeeming grace is the perception that such decisions are made with fairness and integrity.” There must be an alignment between these values and ethical behavior to produce the desired outcome. Implementing an integrity framework is essential for aligning values and ethical behavior. Best Practices (2003) discusses seven components required by an organization to support an integrity framework. They are:

1.Leadership – has the responsibility to uphold the highest level of ethical standards

2.Expectations – feeds into all other aspects of the integrity framework. Core ethical expectations must be developed.

3.Dialogue – a format of open discussion between lead ership and staff to foster two-way

communication resulting in a clear understanding of the expectations.

4.Ethical Risk – must be managed by leadership to ensure the organization maintains a high

level of integrity and ethical standards

5.Training – provide knowledge and skills to equip the members to fulfill their obligations

in an ethical manner

6.Improvement – upon the ethics program to keep it relevant and current

7.Decision-making – incorporation of processes to ensure consideration of the ethical

dimensions involved in the possible outcome(s) of the decision made

Establishing these key components will develop a sustained program, emerging as it progresses

into an institutionalized and fully integrated organizational culture.

Conclusion:

What WorldCom Could Have Done Better

At any time, WorldCom could have began to change their business practices and attempted to right their wrongs, but that may not have resulted any differently than it did when prior transactions were discovered by Cynthia Cooper. A plan to correct fraudulent practices,whether done with intentional harm or as survival techniques, should include restitution to those who were inadvertently negatively affected. Based on the final bankruptcy report by Thornburgh (2004), the organization faced potential claims of enormous magnitude, some of which may be substantiated and others not. The best practice for correcting such activity is to never have strayed so far from common ethical practices in the beginning. When the vision of decision making was merely a bit cloudy, a good framework for ethical decision making would have changed the course of the organization.