Introduction
Ethical responsibility is the efforts aimed at the company’s honest and transparent work. In WorldCom’s case, the business administrator must practice ethical behavior by treating all stakeholders fairly, including management, investors, employees, suppliers, and customers. Any signal about the company’s dishonest acts must be considered, but the interests of all stakeholders must be taken into account.
Case Description
Cynthia Cooper, vice president of internal audit at WorldCom, is confident that the company has been keeping incorrect accounting records for a long time, in particular, recording expenses as investments. Such violations of accounting rules are apparent and elementary. With a high probability, the financial departments or the company auditor should have noticed them. However, Cynthia Cooper is sure that WorldCom is deeply in debt and the company’s good reports, which are the reason for the growth of shares on the exchange, are false. Cynthia Cooper’s property means that the interests of a wide range of people will be undermined, from the company’s management, investors, and partners to ordinary employees who may lose their jobs.
Deontological Point of View
Deontologists base their decisions on abstract universal ethical principles such as honesty, keeping promises, fairness, loyalty, and rights. Kant believed that an action is moral because it is right, not because of its consequences (Kelly et al., 2020). He believed that if a person has a duty, he must fulfill this duty without exception. Based on this point of view, Cynthia Cooper fulfills her obligation to expose fraud in the company, and the consequences for investors or employees at all levels should not affect this action. This logic leads to the conclusion that CEO Bernard Ebbers is lying. According to Kant, such an assumption is unacceptable in a moral sense, but many circumstances make a person lie or make the wrong choice (Kelly et al., 2020). The wrong choice in business leads to numerous losses, including the loss of trust.
Breaking Trust
Difficult choices are a core theme of corporate ethical responsibility. Clear instructions are written to create universal rules of conduct and reduce the negative consequences of wrong choices. However, behind every entry in the balance sheet, there are people with their stories, fears, and doubts. Ordinary people can make mistakes and lie because of the wrong choice. Kant admits that in some cases, secrecy is an acceptable norm since people do not discuss all their mistakes and shortcomings (Kelly et al., 2020). He considers unacceptable secrets with signs of conspiracies. Such secrets are told to the second party to hide them from third parties.
Although each person knows he can be deceived, he trusts other people. According to Brenkert, such trust in a business context is built on three levels: Basic Trust, Guarded Trust, and Extended Trust (Kelly et al., 2020). In the case of WorldCom, Bernard Ebbers, like the company itself, enjoys Extended Trust from investors, employees, and partners. This morning’s value, the loss of which leads to lost profits, loss of investment, and possible bankruptcy of the company.
Whistleblowing
There is a robust ethical conflict for Cynthia Cooper, who is signaling inside the company about possible severe financial irregularities. On the one hand, it has exposed errors that threaten the public interest, but exposure can lead to many circumstances that harm many people. According to Bok, these conflicts exist on personal, corporate, and societal levels (Kelly et al., 2020). In Cooper’s case, she risks her personal safety, career, and public justice. In the case of WorldCom, whistleblowing is not the first in a series of high-profile scandals involving large companies. The need to reform corporate financial reporting and reporting practices has been actively discussed since 2000. Thus, exposing wrongdoing in the world’s largest telecommunications company will be decisive in implementing reforms.
Sarbanes-Oxley Act
A few months after Cynthia Cooper reported wrongdoing at WorldCom, the federal Sarbanes-Oxley Act of 2002 was enacted. This law is also known as the Accounting Reform and Investor Protection Act. The Sarbanes-Oxley Act contains several ethical and legal obligations for companies. In particular, senior managers are personally responsible for the accuracy and completeness of the financial statements and certify the accuracy of the documents quarterly (Upadhyay & Triana, 2021). In addition, the Sarbanes-Oxley Act has improved financial disclosure. It describes expanded reporting requirements for financial transactions, including off-balance sheet transactions, preliminary data, and transactions in shares of corporate officers. Adopting this law led to an increase in the ethics of corporations, which took responsibility for their honesty, transparency, and accountability.
Conclusion
My ethical responsibility as a WorldCom business administrator is to ensure that the company operates with integrity and transparency. Thus, discussing the identified problem and ensuring the safety and trust of all parties is an essential step toward achieving the ethical goal. However, researching the issue will result in a loss of credibility with the party that lied. The next step will be the exposure and public disclosure of the facts that have been discovered. In the case of WorldCom, the publicity of the facts and the work of Cynthia Cooper led to extensive public discussion and the adoption of the Sarbanes-Oxley Act. This law significantly increased the ethical responsibility of businesses and protected investors from fraud and deceit.
References
Kelly, P. T., Louwers, T. J., & Thornton, J. M. (2020). An examination of the virtues of accounting exemplars. In E. Z. Taylor & P. F. Williams (Eds.), The Routledge Handbook of Accounting Ethics (pp. 355-370). Routledge.
Upadhyay, A., & Triana, M. D. C. (2021). Drivers of diversity on boards: The impact of the Sarbanes‐Oxley act. Human Resource Management, 60(4), 517-534. Web.