Unethical leadership and Downfall

We have seen how ethical practices have been crucial in business development across the
globe. The opposite of this also stands true. Unethical practices have previously led
companies to grave disaster, even up to the extent of going bankrupt. We can look no further
than the case of WorldCom. The leaders in their respective positions, the CFO Scott Sullivan
and CEO Bernard Ebbers and their unethical decisions led to the bankruptcy of the company.
WorldCom
WorldCom was an American telecommunication corporation founded by Bernard Ebbers in
1983. It was once the second largest telecommunications company in the world. WorldCom’s
accounting scandal remains one of the biggest cases of fraud till date.
Reasons
Unethical Culture
Upon investigation it was found that WorldCom had a culture where the decisions of the top
management were not to be doubted. The company was filled with groupthink and had no
one to counter argue against the top management’s views. This led to a culture filled with
fraudulent practises at many levels of the organization. The CEO himself was responsible for
submitting corrupt Security and Exchange Commission (SEC) reports.
Unethical Leadership
Upon orders from top management, employees made entries that didn’t have proper
documentation and prepared reposts that were false. These were supported by David Myers,
controller at WorldCom. Lack of a proper corporate code of conduct meant that those at the
top could do whatever they want and the groupthink attitude of the employees would shelter
these activities. In pursuit of profit maximization, the top management capitalized line costs,
one of their major operating expenditures. WorldCom management thought they could
sustain their market value through fooling the market. The company had set unrealistic
financial targets and resorted to unethical means to justify these targets without actually
achieving them. This made the company look good to its shareholders but imposed a long
term risk of going bankrupt.
Consequences
As the stock price went down from 64.51 $ in 1999 to 0.50$ in 2002, Ebbers had to step
down from his position of CEO. It was only after this incident did the truth regarding the
company come out in public. Between 1999 and 2002 the company misreported its pre-tax
income by almost 3.8 billion US dollars. The company had a debt of 5.75 billion USD and it
eventually went bankrupt.
The impact of such unethical leadership on the company was massive. The stock that was
once graded by Wall Street as B+ went down to CCC- after the scandal. The company had to
cut down about 17000 of its employees. As many as 25 banks started suing WorldCom for
defaulting loan payments. The event also jeopardized service to nearly 100 million customers
which included general public, government agencies, social security beneficiaries and the
Federal Aviation Association. The aim of short term profits at the expense of ethical values
eventually cost the company in the long run.
Reference
https://www.oreilly.com/library/view/business-ethics-and/9789332511255/xhtml/cs_chapter016.xhtml

http://professional-ethics-articles.blogspot.com/2016/01/worldcom-un-ethical-behavior.html?m=1

https://www.thebalance.com/worldcom-s-magic-trick-356121

Rodney Martin
Voya Financial is an American investment and insurance company founded in 1991. It has
been named as one of the world’s most ethical companies by Ethisphere Institute for the 6th
year in a row. The CEO of the company Rodney Martin is at the heart of this achievement.
As the CEO himself puts it, the company emphasizes trust and transparency in all its
dealings. It positively reinforces ethics in the day to day activities of its employees by
rewarding them not only on the basis of “what” is achieved, but also on the basis of “how” it
is achieved. This provides for a culture at Voya Financial that is characterized by fairness and
transparency. Hence at every level of the organization, the employees strive to achieve their
goals in ethical ways. The company culture set at the top by Rodney Martin also focuses on
diversity, inclusion and equality alongside environmental sustainability as part of the mission
of the company. The company is recognized as a leader in board diversity, with 50% of the
company’s board directors being women. This helps to ensure all round benefits for the
stakeholders of the company.
One of the company’s 5 core values which stands “We do the right thing” is reflected by the
approach the company takes in dealing with its employees, customers ,environment and
other relevant stakeholders. It helps to ensure trust between the company itself and its
stakeholders.
The commitment to ethics set by top management has earned the company dual achievement
of World’s Most Ethical Companies (by Ethisphere Institute) and World’s Most Admired
Companies (by Forbes). However the impact of the ethical culture is far more than this. For a
financial institution to be able to receive this award, it automatically instils trust among
consumers in doing business with this company. This trust is the secret behind the success of
the company. This ensured that the company returned almost 4 Billion USD excess capital to
its shareholders. It also helped the company’s share price outperform its rivals. It also makes
the employees more committed to the company’s cause.
Reference
https://www.courant.com/business/hc-voya-financial-ceo-20140717

-story.htmlhttps://corporate.voya.com/corporate-responsibility/about-corporate-responsibility

Ethisphere. (n.d.). Retrieved from https://bela.ethisphere.com/wp-content/uploads/Consumers-Prefer-

Ethics-Rod-Martin.pdf