Business Leaders: Role Model Duty for Ethical Practices - Research Paper

Introduction

Business leaders play an instrumental role in the promotion of sustainable ethical business practices by sticking to the required operational standards and securing the best interests of the business stakeholders (Hayes, 2009). As such, leaders have an important role model duty within an organization to ensure that the organization operates within the rules and standards. In different occasions, business leaders such as Bernard Ebbers have been on the receiving end due to malpractices that have negatively affected the business operations, publicity, profitability and continuity (Sidak, 2003). Business executives presents the optimum image of an organization and the different roles and responsibilities which seek to increase the shareholders equity. It is important for leaders to ensure that businesses operate within the rules which is instrumental in ensuring business sustainability (Hayes, 2009). In the 21st century, business image matters significantly and in the cases where a business is given negative publicity the sales plummets which is detrimental to the overall business performance (Rao, 2018). One of the disgraceful business leaders is WorldCom's chief executive officer Bernard Ebbers who was blamed for the fall of the prime telecommunication campaign due to fraudulent behavior and lack of organizational internal oversight (Sidak, 2003). The lack of checks and balances gave Bernard Ebbers enough power to make absolute decisions that were detrimental to the overall business sustainability. This research paper will assess how Bernard Ebbers poor leadership skills contributed to the failure of WorldCom telecommunications organization.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Study Background

It is believed that Bernard Ebbers was directly involved in the accounting malpractices while as WorldCom CEO which led to the financial failure of the organization at the end. The fraudulent activities within the organization were conducted between 1999 and 2002 and their primary role was to cheat investors and depict the organization as a better performing company compared to the actual price of stock in the organization. Ebbers was aware of the accounting books fraud but still kept quiet with the aim of securing high stock sales in the market. At the time in WorldCom the company was experiencing a very severe financial problem if the company stocks kept on plummeting. Ebber's actions significantly affected the business public image and the discovery of the fraud led to the plummeting of the business financial status. Despite being the largest company offering telecommunication services in the city the company faced a very large financial problem which led to its failure. This shows that the actions of a business leaders can significantly influence a business outcomes. Corporate greed was one of the major causes of WorldCom fraud and failure as a business. The CEO and other business stakeholders failed to identify the immediate danger posed by Ebbers decision to manipulate the business financial accounts which led to the misrepresentation of the actual business financial records (Sidak, 2003).

Research Hypothesis

• Bernard Ebbers lack of ethical leadership led to the failure of WorldCom.
• Lack of a financial ethical framework and regulation in WorldCom facilitated Ebbers financial malpractices.

Literature Review

Mistakes Made by Chief Executive Officers (Ceos)

Anthony DiPrimio (2010) carried out a study that sought to establish some of the mistakes committed by CEOs and their impacts on such organizations. The review looked at the case of Albert John Dunlap, who managed various companies, being successful with one while failing terribly with another (Collins, 2018). As the CEO of Scott Paper Corporation, he was able to turn around its fortunes using some of the most dubious and arrogance means. However, he could not do the same for Sunbeam, because he tried to apply the same strategy of laying off workers. The paper brings out the causative factors that initiate the downfall of a CEO, including corruption, arrogance and abuse of power. Additionally, the paper goes on to establish that the WorldCom collapsed because of multibillion dollar accounting fraud, committed by the then CEO, Mr. Bernard Ebbers (DiPrimio, 2010). It was later revealed that he overpaid for everything he invested in. The other reason for failure was his inability to lead the integration of WorldCom with its acquisitions.

Book Analysis Essay on the Boy Who Was Raised as a Dog

Kurt Eichenwald (2002) did an article that described the truth behind the rise and fall of the WorldCom. Around the year 2000, Mr. Ebbers explained his delight about how he managed to lead the company into one of the fastest growing corporations in the country, helped no fewer than 65 mergers. According to analysts, it was very hard to see the leadership qualities of Ebbers (Kurt, 2002). In fact, the paper adds that his failure to seamlessly integrate the acquired corporations led to the demise of the company. The paper is reliable because the researcher interviewed some of the insiders at the company including current and former employees at the time.

Analysis and Management of Deviant Organizational Leaders

Deviance is described as differing from the norms and expectations of the society. A study carried out by Karen Hayes collected data from other works that had been done before on the deviance, to establish effects it normally has on organizations and their leaders. The study established, from the definitions of deviance and life experiences of other authors that leaders normally deviate from the norms of their organizational cultures to make decisions that sometimes turn out to be effective, while other times they fail (Ermann & Lundman, 2002). It adds that positive organizations have leaders who are normally willing to make strange decisions, hoping that such decisions help in the long run (Hayes, 2009). However, depending on the risk factors at hand, such decisions might ruin a manager.

The Fall of Worldcom and the Rise of Corporate Whistleblowing

One of the most important reasons for the failure of the company as mentioned above was lack of effective strategy that would be used to integrate the acquisitions (Moberg & Romar, 2003). The paper also used the study done by Thornburgh (2002), to reveal that WorldCom failed due to fraudulent accounting practices and 'friendly loans' given to sweetheart executives. Cynthia Cooper, the former vice president of internal audit at the company, took the initiative to report historical fraud at a time when dishonesty was rampant in the corporate world in the United States.

Ethical Leadership

According to Rao (2018), leaders in the corporate world must realize that it is very hard to climb the ladder of success while it is easy to fall. Ethics in leadership is important as it directs leaders to make mindful decisions that encompass all factors. In general, leaders must ensure they are ethical by providing the truth about their lives and organizations as they maintain their integrity. Achieving success with integrity helps build a respected and lasting legacy.

Collapse of American Telecommunications Deregulation

The regulations of the telecommunications have grown since the enactment of the Telecommunications act in 1996. The Federal Communications Commission (FCC) had the responsibility to regulate WorldCom but missed its fraud and bankruptcy because FCC concentrated on competitiveness in the telecommunications industry (Sidak, 2003). The false information given by the WorldCom about their traffic and accounting encouraged overinvestment on long distance and internet capacity.

Findings Summary

Anthony DiPrimio (2010) carried out a study that sought to establish some of the mistakes committed by CEOs and their impacts on organizations. The review looked at some individual CEO cases including that of Albert John Dunlap, who managed various companies, being successful with one while failing terribly with another (Collins, 2018). He managed two different companies, achieving different results. Kurt Eichenwald (2002) did an article that described the truth behind the rise and fall of the WorldCom. Around the year 2000, Mr. Ebbers explained his delight about how he managed to lead the company into one of the fastest growing corporations in the country, helped no fewer than 65 mergers.

Another study carried out by Karen Hayes collected data from other works that had been done before on the deviance, to establish effects it normally has on organizations and their leaders. The study established, from the definitions of deviance and life experiences of other authors that leaders normally deviate from the norms of their organizational cultures to make decisions that sometimes turn out to be effective, while other times they fail (Ermann & Lundman, 2002). One of the most important reasons for the failure of the company as mentioned above was lack of effective strategy that would be used to integrate the acquisitions (Moberg & Romar, 2003). The paper also used the study done by Thornburgh (2002), to reveal that WorldCom failed due to fraudulent accounting practices and 'friendly loans' given to sweetheart executives.

A study done by Rao (2018) suggested that leaders in the corporate world must realize that it is very hard to climb the ladder of success while it is easy to fall. Ethics in leadership is important as it directs leaders to make mindful decisions that encompass all factors. Additionally, the regulations of the telecommunications have grown since the enactment of the Telecommunications act in 1996. The Federal Communications Commission (FCC) had the responsibility to regulate WorldCom but missed its fraud and bankruptcy because FCC concentrated on competitiveness in the telecommunications industry (Sidak, 2003). The false information given by the WorldCom about their traffic and accounting encouraged overinvestment on long distance and internet capacity.

Conclusion

The review of literature shows that there is enough evidence to approve the hypothesis. Therefore, the lack of ethical principles by the CEO and also the failure of the organization to have an ethical framework to guide its financial reporting gave Ebbers a chance to commit fraud which significantly destroyed the organization hypothesis. This review shows that ethical framework and principles within an organization plays an instrumental role in the overall business compliance to the existing financial reporting requirements and in good faith. Greed and market anxiety significantly influenced Ebbers decision to commit fraud to save the business from collapse and instill investor confidence in the organization. There is need to create more strict financial regulation framework to be able to curtail financial malpractices by leaders with the aim of safeguarding the organization place in the market. Introducing an ethical framework in hiring and retraining new leaders to create an organization culture which protects an organization financial integrity. Further studies on the role of an ethical framework in an organization impact in financial reporting can be instrumental in understanding how ethical leadership improve financial reporting integrity in the corporate world.

References

Collins, D. (2018). Stories for Management Success: The Power of Talk in Organizations. Routledge. Retrieved from https://content.taylorfrancis.com/books/download?dac=C2016-0-41995-0&isbn=9781351665810&format=googlePreviewPdf

DiPrimio, A. (2010). The Managerial Mistakes that a CEO Must Avoid. Journal of Case Research in Business and Economics, 2, 1. Retrieved from http://search.proquest.com/openview/00f84d03902bfd5b9899721f5e28dcb0/1.pdf?pq-origsite=gscholar&cbl=237741

Eichenwald, K. (2002). For WorldCom, acquisitions were behind its rise and fa...