CASE 4: ACCOUNTING FRAUD AT WORLDCOM
Betty Vinson: victim or villain? Should criminal fraud charges have been brought to her? How should employees react when ordered by their employer to do something they do not believe in or feel uncomfortable doing?
In discussing whether Vinson should been charged with criminal fraud, it can be analyzed from ethical perspective which can truly judge whether she was morally responsible for the wrong or not. In order to determine whether Vinson was morally responsible for the fraud, these three criteria should be fulfilled first: causality, knowledge and freedom. The causality criteria can be referred as whether that individual caused or helped cause the ...view middle of the document...
Vinson can be considered as one of major players in WorldCom’s fraudulent activities as she was one of those who made the entries for the accrual releases and expense capitalization. Moreover, she also participated in obtaining the account number for the international fixed costs in order to release $370 million accruals when the director of the division, Schneberger himself refused to make the adjustment. In addition, Vinson did all the fraudulent activities without any feeling of uncertainty that the actions were wrong even though she herself had difficulty and personal dilemma to refuse such actions.
Despite those factors, the wrongdoing had inflicted a significant financial and psychological impact on the company and its stakeholders. Her involvement in “cooking the books” had resulted in hundred millions differences between reported and actual line-cost expenses as well as between reported and actual income/loss before taxes and minority interests. The action consequently led the company to bankruptcy and other stakeholders such as the employees, the retail customers and the public were significantly affected. These matters hence proved the seriousness of the wrongdoing thus denies all factors argued for the mitigation of the responsibility.
In summary, Vinson can be considered as a villain as she morally responsible for the wrong and hence should be charged on the criminal fraud.
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Employees are subject to abide the orders from superiors as long as the actions are legal and ethical. Receiving orders to do something they do not believe in or feel uncomfortable doing may indicate that the action is not ethical despite it being legal or not.
The first step that can be taken by employees in resolving such dilemma is consult with the code of ethics for formal guidance. In the WorldCom case however, there were no written policies for the management practices itself yet the code of ethics. Therefore, the employees in WorldCom had no formal guidance to lead them to ethical decision in abiding or disobeying their superiors such as Sullivan, Myers and Yates.
Apart from that, the employees might determine themselves the alternative actions are available to them in that situation. After that, they should weigh up the benefits and costs of the alternatives to themselves as well as to others who might be affected by the action taken. The alternative that produces the greatest benefits then should be chosen. Taking Vinson as example in WorldCom case, she should not only consider about her personal matters besides the company’s sake, but she also should consider the consequences towards the company’s stakeholders before performing the fraud. However, there is underlying problem in this approach where employees...