Assignment 2 - SP18-BAF-018

Q1: Is it is possible that the UK quoted company sector could experience its own version of
world.com?
It is obvious that UK can also face the same situation because the UK also face the same cases
like BCCI and Maxwell in history. The check by financial statement, corporate governance and
audit are not enough to pretend the fraud. If the UK, USA and the countries also have perfect
system of financial reporting and policies related corporate governance that might not enough
because it all about ethics.
So if the CEO of WorldCom follow the proper financial management and ethics of business than
this scandal would never happen in US. It is says that UK have perfect system of financial
reporting but in UK investor face company frauds but UK don’t change its corporate governance
polices so the they are just lucky enough to not face scandal like WorldCom.
Q2: Should short-sellers be described as ‘stakeholders’?
Short- selling are the investors that know that the share price of the company are down fall in
near future so the purchase shares of that company on credit from broker and sell them to another
investor or when the price of the shares fall the purchase the shares on low price and give back to
the broker and earn profit. The investor in short-selling increase the demand to increase the share
price when there is lesser shares in the market people want to buy it and the investor sell that
share without purchasing it. Mostly in case of WorldCom the investor in short-selling seen as
stakeholders.
Q3: Identify the stakeholders who lost out when WorldCom filed for bankruptcy and
describe the extent of their losses?
The first and the main stakeholder was Bernard ebbers the CEO of WorldCom. He is enforced to
resign in 2002 after bankruptcy of company under chapter 11. The executives also sentenced to
jail. The CFO Scott Sullivan is planner of the scandal and he is fired and the scandal is reviled
and also sentenced to jail. David Mayer is the controller of the WorldCom he is also fired due to
involvement in the fraud. The employees from accounting department also fired Arthur
Anderson was the auditor of the WorldCom also replaced by Audit Company.
Q4: Identify the main lessons that can be learned from WorldCom’s Bankruptcy?
In the company basic ethics are not followed every company should organize the ethics training
to avoid such fraud. The corporate governance policies are not followed executive work for their
own personal interest instead of working for shareholders and stakeholder. Authority must be
straightforward and can be assessed at some random purpose of time. The pioneers ought to be
not despotic and should be available to any sort of data sharing and giving inputs. Along these
lines it ought to be all encompassing in approach and should offer choice straightforwardness
and individual responsibility (Sarno, J.J. 2009).
The other lesson is investor should not ignore the cash flow. It is not necessarily the case that
each organization with overall gain that essentially outperforms cash flow in thier the books. At
times, it just shows that the organization is contributing intensely for development. In the event
that it is clear where the cash is going - for example new plants, new stores, new hardware - and
the ventures are driving critical development. WorldCom booking its expenses into capital so it
is necessary to analyze the cash flow of the company. For example in 2001 the revenue of the
company is 2.4$ billion but the cash flow is only 108$ million.
To what part can ethics be considered part of the solution to prevent future bankruptcies
such as WorldCom?
Ethics assumes a significant job and are a key job major part in forestalling money related
embarrassments like WorldCom. Ethics like open correspondence should be energized so the
informants can turn away such financial emergency with no dread. It will advance informants
which will be dealt with both legitimately significant issues and will help in sharing data and the
need acquire change any association.
In spite of the fact that instructing alongside coaching are significant pieces of any corporate
ethics. This will bring confidence and exalt any sort of laborer in the association. Thus ethics
have significant influence by creating pattern of straightforward initiative. Morals should be
joined with the work culture in the association for a superior and stable association, just morals
preparing or consistence projects won't function admirably if the workplace is absolutely
materialistic or if the laborers are not regarded and treated with pride in the association. This is
the thing that occurred in WorldCom and prompted its defeat.
Reference:
Sarno, J.J. 2009, Lessons from WorldCom, Employers association of New

Jersey.http://www.slideshare.net/JohnJS/lessons-from-world-com-presentation

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Q1: Is it is possible that the UK quoted company sector could experience its own version of

Sarno, J.J. 2009, Lessons from WorldCom, Employers association of New

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