Y3 WorldCom Inc From its inception in 1983 WorldCom Inc grew to be the second largest long distance telephone call operator in America. Throughout the 1990’s the company grew through a serious of acquisitions and by April 1999 its market capitalisation was $186bn. However, by July 2002 the company had filed for bankruptcy. When it filed its 2001 10K Report with the SEC the company reported annual revenues of $37,668m, and Gross Assets of $33,706m and employed 80,000 at its peak. WorldCom CEO Bernie Ebbers and the WorldCom Chief Financial Officer Scott Sullivan were both found guilty of charges of fraud. Ebbers was sentenced to 25 years in jail and Sullivan a much lesser sentence of 5 years, Sullivan entered into a plea bargain and testified against Ebbers. Over 35,000 employees lost their jobs with WorldCom and investors lost $175bn (3 times the size of Enron) Q) Critically review the Sarbanes Oxley Act which was introduced soon after the collapse of both WorldCom and Enron; how did it seek to address the problems raised by WorldCom and other, similar scandals? Do you think that WorldCom’s collapse points to serious difficulties in the shareholder approach to corporate governance, which is widespread in the West and in the US especially? Would other approaches be more effective at preventing business from acting unethically? Please answer in detail

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Y3 WorldCom Inc From its inception in 1983 WorldCom Inc grew to be the second largest long distance telephone call operator in America. Throughout the 1990’s the company grew through a serious of acquisitions and by April 1999 its market capitalisation was $186bn. However, by July 2002 the company had filed for bankruptcy. When it filed its 2001 10K Report with the SEC the company reported annual revenues of $37,668m, and Gross Assets of $33,706m and employed 80,000 at its peak. WorldCom CEO Bernie Ebbers and the WorldCom Chief Financial Officer Scott Sullivan were both found guilty of charges of fraud. Ebbers was sentenced to 25 years in jail and Sullivan a much lesser sentence of 5 years, Sullivan entered into a plea bargain and testified against Ebbers. Over 35,000 employees lost their jobs with WorldCom and investors lost $175bn (3 times the size of Enron) Q) Critically review the Sarbanes Oxley Act which was introduced soon after the collapse of both WorldCom and Enron; how did it seek to address the problems raised by WorldCom and other, similar scandals? Do you think that WorldCom’s collapse points to serious difficulties in the shareholder approach to corporate governance, which is widespread in the West and in the US especially? Would other approaches be more effective at preventing business from acting unethically? Please answer in detail

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