1- Lack of Strategy - The executive and strategic decisions at WorldCom were characterized by rapid growth through acquisitions, these plans were based on unrealistic and over ambitious management plans which failed to properly integrate the systems and policies of the WorldCom with those of the Investee.
2- Company Culture – Top Management’s Managing style. The growth through acquisitions “strategy” at WorldCom was enforced and reinforced by top management. The consistent pressures from top management created an aggressive and competitive culture that did not contain any communication of the
need for honesty or truthfulness or ethics within the company.
3- Ineffectiveness of the Board of Directors –the board was inactive and were not completely aware about the WorldCom’s matters, also their compensation was mostly based upon the appreciation of the stock, so they were deemed to be depended on Company growth and stock appreciation.
4- Ineffective Audit Committee - the lack of independence and awareness of the Board trickled down to the audit committee. The committee members would merely have any objective participation in Audit findings.
5- Ineffective External Audit – Arthur Andersen, was responsible to provide an independent opinion of the Financial statement, however Audit approach failed to identify the flaws in the Company’s internal control due to overdependence on the control environment.
6- Dishonest Management - WorldCom Chief Financial Officer Scott Sullivan and former Chief Accountant David Myers were accomplice to wrongful reporting to shareholders and to authorities, they were responsible to window dress and misrepresent the financial position of the Company.
7- Unauthorized Loans/Personal favors – The compensation committee exceeded their authority in approving loans for Mr. Bernie Ebbers (CEO), the loans were provided without prior approval from the board, this indicate a weak control environment without any due accountability
8- Huge liabilities/loans – the loans were taken without any due diligence and proper feasibility, this resulted in higher gearing and exposed the company to risk of debt covenant violations and eventually to bankruptcy due to non-payment.
9- Lack of Corporate governance - Corporate governance was very weak due to the lack of accountability/ check and balance system, the board, lack the oversight and had no control over the activities of the company, mostly the major investment decisions were done without proper approval or vetting process from the board.
10- Company culture/communication gap - due to extensive and aggressive acquisitions, the company failed to reach out and deliver its message to the employees of the investee company, it failed to communicate its expectation from the staff, resulting in an communication gap between the management and the employees.
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