Worldcom: Keeping Planes in the Air (a)

Abstract

This case focuses on the dilemma faced by Betty Vinson, a senior manager in the corporate accounting division of telecommunications giant WorldCom, when asked repeatedly to falsify financial information. The telecommunications industry was in a severe slump after the booming 1990s, and WorldCom's stock price was suffering. WorldCom's senior management was eager to continue the company's string of ever-increasing operating results in hopes that those reported results would help the stock buck the industry's downward trend. At the same time, however, the company faced slowing sales growth and rising costs—and $685 million in unpaid bills from small, high-tech customers that had gone bankrupt. Vinson did not want to make the false entries, but pressure from above (primarily from WorldCom's COO Scott Sullivan), led her to act against her instincts. Vinson's story is contrasted with that of Cynthia Cooper, the head of WorldCom's internal audit department, who refused to accept the fraud that she and her team uncovered.

Excerpt

UVA-E-0335

Sept. 24, 2008

WorldCom: keeping planes in the air (a)

Betty Vinson, a senior manager in the corporate accounting division of telecommunications giant WorldCom, was in a real quandary as October 2000 came to a close. Her immediate boss, Buford Yates, had told Vinson to make accounting entries dipping into reserves to help the company meet its earnings target for the third quarter. The request ran against her understanding of the requirements of the accounting standards, but the order had come from Scott Sullivan, WorldCom's CFO. The telecommunications industry was in a severe slump after the booming 1990s, and WorldCom's stock price was suffering. WorldCom's senior management was eager to continue the company's string of ever-increasing operating results in hopes that those reported results would help the stock buck the industry's downward trend. At the same time, however, the company faced slowing sales growth and rising costs—and $ 685 million in unpaid bills from small, high-tech customers that had gone bankrupt.

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Keywords: Stakeholder management, telecommunications, ethics, ethical issues, leadership, authority, moral muteness, accounting, technology, fraud, obedience to authority, WorldCom