EXAMINING A BUSINESS FAILURE

Examining a Business Failure



Examining a Business Failure

Organizations today must stay in focus in order to stay competitive and successful. There are times when an organization fails due to various reasoning's. Today's paper will focus on examining a business failure. The business of discussion in this paper will be WorldCom. Organizational behavior theories will be discussed. Also there will be a discussion on what role did management, leadership, and the organizational structure play on the failure of the business. First there will be a brief summary of WorldCom.

WorldCom

In 1983 a company called Long Distance Discount Services (LDDS) was founded in Mississippi. LDDS went public after it merged with Advantage Companies. In 1995 LDDS name was changed to LDDS WorldCom and eventually dropped the LDDS and became WorldCom. In the 1990's began to grow due to their acquisitions. WorldCom bought and merged with 8 different companies starting in 1992 and ending in 2001. In November of 1997 an announcement was made that WorldCom and MCI Communication would merge together to bring to life a company called MCI WorldCom. Chapter 11 bankruptcy was filed in 2002 and in 2004 WorldCom came out of Chapter 1 bankruptcy with six billion dollars in which 5.7 billion of it was used to pay off their debt (Donker, H. and Zahir, S., 2007).

Organizational Behavior Theories

The SEC report for WorldCom showed that in three main areas there was fraudulent behavior. By moving the line costs to capital to show that there was less expenses was one area of fraud shown in the report. Making the revenue entries show that the organization had gained more in earnings and releasing the accruals at the wrong time to show that the company currently had a decrease in expenses was the two other areas of fraud (Scharff, M. M., 2005). The SEC report showed that there were other areas of problems made by the board of directors and the executive team (Scharff, M. M., 2005).

During the latter part of the 1990's WorldCom was placed under a great deal of pressure to save and increase their earnings before interest, depreciation, taxes, and amortization and their levels of cash flow when they had a decrease in their telecommunication orders and the elevated price points were in demand. At this time the company started their accounting practices that were fraudulent. There could have been a possibility that WorldCom's external auditor was involved ...