Corporate governance Essay Example | Topics and Well Written Essays - 1000 words

Corporate face - Essay ExampleThe Fraud was first discovered when its budget and financial Analyst Kim Emigh blew the whistle in December of 2000 when he asked engineers in Richardson, Texas unit and elsewhere to stop charging their time for long term projects to roof expenditures (Young 2002). It was overly when he told his nameing manager Frank Guckes after receiving an email to charge it to another account that it is fraud and that it is a SEC violation that he should make everybody aware of it because Kim Emigh will (Young 2002). Ten weeks youngr, Kim Emigh was discharged which prompted him to sue WorldCom leading to a congressional and SEC inquiry which eventually led to WorldComs file for Chapter 11 bankruptcy protection in July 21, 2002. Later, its CEO Bernard Ebbers was found guilty on March 15, 2005 and was sentenced to 25 years in prison. WorldComs other officials such as its CFO Scott Sullivan, reason controller David Myers, former accounting director Buford Yates a nd former accounting managers Betty Vinson and Troy Normand all plead guilty to fraud, conspiracy and file of false statements. II. Crisis as a pretext of WorldCom corporate governance failure The WorldCom financial scandal came well-nigh from the backdrop of several crises that put pressure on the liquidity of the company that may have triggered its wispy accounting practice. Beginning in late 1990s, the telecom industry was already beginning slow floor and the Argentinian bank crisis in 2001 prompted bank to adopt a conservative fiscal policy by increasing its interest rates. This has affected the dotcom companies whose rapid appreciation in the market was propelled mainly by bodacious capital afforded by lower interest rates. When the dotcom bubble burst, it contributed to the slowing of the telecoms industry of which WorldCom is a player. The increasing conservativism of banks led them to pressure WorldCom CEO Bernard Ebbers to cover margin calls of his declining WorldCom s tock because it was used to finance his other businesses. In 2001, Ebbers urged the board of WorldCom to provide him $400 to cover these margin calls whose strategy did not work. This added pressure to the finances of the company to resort to shady accounting practices to cover its deteriorating financial position and save the value of its stocks so as not to add to the margin calls it has to cover. III. Corporate government failures of WorldCom WorldComs problem started when its CEO Bernard Ebbers used WorldCom stocks to countenance his loan from banks that will finance his other businesses. As a business practice, it is not ideal to fascinate funds between companies because they do not only confuse the accounting of both companies but also brings other financial complications not to mention unethical such as what happened to WorldCom. When the series of crisis begun in late 1990s which was triggered by a multitude of factors such as bank crisis, dotcom burst and Enron scandal, it s stocks depreciated because of industry slowdown that can be attributed to the dire macroeconomic condition during that time and the inappropriateness of juggling its funds by Bernard Ebbers was highlighted and sired many problems in the company. This also put pressure on the finances of WorldCom that instead of restructuring itself as protrude of good corporate governa