WorldCom Collapse
The collapse of WorldCom remains a historical corporate mistake. WorldCom was a model corporation whose collapse shocked many. WorldCom’s collapse has been attributed to poor corporate governance and misuse of business intelligence data to befit executives rather than serving consumer interests.
WorldCom’s executives are accused of mining information and turn it into business practices that would benefit the company illegally.
Eventually money was lost after auditor unearthed these unscrupulous practices. Subsequently WorldCom’s clout began to crumble. This lead to; its value at Wall Street go through crunches, investor anger and reform campaigns. Investors and consumer dissonance further exposed the conglomerate to bad economic weather and subsequent collapse.
How WorldCom misused data leading to subsequent collapse
Audit reports by senior accountant’s unearthed massive fraud at WorldCom. The accounting fraud at WorldCom reached critical mass after accounting malpractices using data collected by experts at the company to cover the company losses were unearthed (Backover, Andrew & Michelle Lessler, 2002).
WorldCom executives analyzed stocks performance in Wall Street, identified bookkeeping as a way to generate financial reports that indicated WorldCom was growing, to meet Wall Street expectations, subsequently, keeping the company stock and growing in value.
WorldCom was masking its losses using accounting data. The company also engaged in giving its executives huge loans to protect the company share value at Wall Street. The executives at WorldCom bred a culture of cutting corners to meet business needs (Why Smart Executives Fail, 2009).
Subsequently, when revenue audit was unsatisfactory, the executives used alternative financial figures along with instructions to change them for WorldCom’s actual financial audit data. The company also engaged in allotting high reserves for bad debts to be used as back-ups to operating revenue in order to meet fiscal objectives. Overwhelmed by its internally approved fraud the company overstated its fiscal results by $3.8 billion which is largely seen as the world’s largest corporate bookkeeping malpractice (Backover, Andrew & Michelle Lessler, 2002).
The results of planned corporate bookkeeping
WorldCom was able to cash in through this planned bookkeeping. However, these ‘made up’ financial results did not reflect the truth about WorldCom’s actual value and financial health. The massive fraud which had the blessings of the company head led to the dramatic loss of WorldCom’s value from $180billion to just $350 million. The scum was unearthed by Cynthia Cooper, Vice President of Internal audit. She found out that WorldCom was fraudulently capitalizing on cost lines and treating them as expenses (Drezen, Yochi, 2002).
When federal authorities intervened, WorldCom was accused of violating antifraud laws through the corporate bookkeeping that manipulated earnings to meet Wall Street requirements and protect the company stock at the bourse.
Limitations and significance of data
Data collected to aid business intelligence units in WorldCom was aimed only at assessing threats on the company, identifying ways to help the company avoid impeding financial storms, meet Wall Street expectations and manage the company stocks value through proper governance practices. However, the data was misused as a tool to mask internal lending so as to protect the company stock value, limit shareholding, and increase hype so that share value would resonate to the alleged gains made by WorldCom (Drezen, Yochi, 2002)
Ethical Implications of data misuse on WorldCom
Federal authorities closed in on WorldCom execs and charged them with committing fraudulent audit that eventually led to a $9billion profits misrepresentation. The intentions of this fraudlent book keeping were to fix things for WorldCom (Wayne, 2004).
Authorities sued the company execs who were involved in the scum.
The company lost its value from $200 million to a mere $350 million.
The company was declared bankrupt and was put under receivership.
References
Backover, Andrew & Michelle Lessler, (2002), ‘Internal rifts threaten WorldCom’ Section: Money; pg 1B.
Drezen, Yochi (2002) ‘Push for sales fostered abuses at WorldCom’ The Wall Street Journal: B1.
Wayne Michael, (2004), The WorldCom Collapse ‘Citigroup’s Guiding Hand’ .
Why Smart Executives Fail, (2009).