FromWorldComtoMCI_Decison2006

FromWorldComtoMCI_Decison2006 - Case Study From WorldCom to...

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From WorldCom to MCI Satish C. Pandey* and Pramod Verma** Decision, Vol. 33, No.2, July - December, 2006 Introduction On June 25, 2002, the world was shocked by the discovery of a $ 3.8 billion accounting fraud at leading US telecom company WorldCom Inc. This incident led to the termination of its CFO Scott Sullivan and Controller David Myers, and resulted in the biggest stock market crash at that time. Angry investors filed suits against the company in different courts and 17,000 employees lost their jobs. Later, on July 21, 2002, the company filed for the bankruptcy protection under Chapter 11 of US Bankruptcy code. Under this protection, the company was allowed to operate under court supervision and implement financial and organizational restructuring for improving its internal systems and processes. For the CEO, John Sidgmore and his executive board members, this opportunity was a silver lining behind the dark clouds. In the US market, the image of WorldCom had been tarnished, its integrity lost and faith shattered. So the board decided to carry out its operations with highest integrity and regain financial strength and focus. As a significant step to this direction, the board appointed Greg Rayburn as Chief Restructuring Officer and John Dubel as Chief Financial Officer. 1 On September 10, John Sidgmore formally declared his intention to look for the new CEO to carry out the reorganization process further. On October 1, the bankruptcy court for the Southern District of New York approved WorldCom’s request to pay full severance and benefits to former employees whose severance had previously been limited under the company’s Chapter 11 filing. Also Jonathan Crane rejoined company as President, Sales and Service with responsibility for U.S. Sales, Global Accounts, Customer Service, and Business Marketing. On October 15, 2002, the Bankruptcy * Assoicate Professor, Organizational Behaviour, Mudra Institute of Communications, Ahmedabad (MICA), Ahmedabad, e-mail: satish@mica.ac.in, satishpandey_99@yahoo.com ** Professor (Retd.) of Personnel Management and Industrial Relations, Indian Institute of Management, Ahmedabad. Currently assoicated with ICFAI Business School, Ahmedabad, Gandhi Labour Institute, Ahmedabad and various other academic bodies as Honourary Professor. e-mail: pramodverma36@yahoo.co.in. The authors sincerely acnowledge Prof Sridhar Chari, Visiting Professor (Finance), MICA, Dr. Seema Gupta, Assistant Professor (Marketing Management) and Director, MICA and Rishikesha Krishnan, Professor (Corporate Strategy), IIM, Bangalore for their valuable comments and suggestions at various stages of case development. 1 Source: ‘Why WorldCom Will Thrive?’, 2002, available at www.worldcom.com Case Study
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2 Ibid. 3
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This note was uploaded on 12/05/2011 for the course ECON 101 taught by Professor Dr.moi during the Spring '11 term at University of Central Florida.

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FromWorldComtoMCI_Decison2006 - Case Study From WorldCom to...

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