Examining a Business Failure
Sandra C. Williams
LDR/531
December 6, 2012
Michael Bates
Examining a Business Failure
WorldCom was a large telecom company that relished an almost dramatic rise during the 1990’s but ran into trouble in the early 2000’s. During the year of 2001, they experienced the most difficult financial times. WorldCom was a strong, innovative company with tremendous assets. Their annual revenues were more than $30 billion, and even after recent layoffs, WorldCom still had more than 60,000 employees. WorldCom had more than 20 million customers, and was the largest internet carrier in the world. Beginning at least in or about July 2000, WorldCom’s expenses as a percentage of its total revenue began to increase, resulting in a decline in the rate of growth of WorldCom’s earnings (of America, Sullivan, & Yates, Jr., 2002). The decline in earnings created a substantial risk that, unless WorldCom’s performance improved, its earnings would fail to meet analysts’ expectations and the market price.
Leadership and Management
Bernie Ebbers, was not the founder of WorldCom, was the major force in building LDDS, a small start-up company in Mississippi offering regional long distance discount service, into the self-proclaimed “pre-eminent” global communications company for the digital generation. In 1997, Ebbers made his intentions very clear when he told a Fortune reporter, “Our goal is not to capture market share or be global. Our goal is to be the number one stock on Wall Street” (Charan & Harrington, 2007). Ebbers was an influential leader who was able to attract followers to his Board of Directors, and his management team, as well as stockholders, members of the investment community, and the press. He was a risky, big spender, over-zealous, deal maker whose accomplishments gained him tremendous respect.
WorldCom’s ex-Chief Executive Officer, Bernie Ebbers, instigated much of the culture and pressure that allowed the fraud...