Worldcom ethics case | Management homework help


1. In March 2002, when WorldCom was struggling to coordinate and integrate the complex mess created by the 65 companies it had acquired, WorldCom’s then highly respected CFO Scott Sullivan, moved $400 million from a reserve account and recorded it as “income” in the company’s financial records. Alerted to this, Cynthia Cooper, the head of WorldCom’s internal audit department, began to secretly examine the books of the company and soon discovered that Scott Sullivan, CFO of WorldCom and David Myers, WorldCom’s controller, for years had publicly reported billions of dollars as “capital expenditures” when they were really operating costs, ignored uncollectible receivables, and reported as income what were really reserve funds, and did all this with the help of Arthur Andersen, the company’s auditing and accounting firm. Though angrily threatened by Sullivan, and risking her job and career, on June 20, 2002, an apprehensive Cooper courageously met with the audit committee of WorldCom’s board of directors and told them what had been going on. On June 25, WorldCom’s directors announced the company had inflated its profits by over $3.8 billion – an amount later raised to $9 billion – in the greatest accounting fraud in history. Sullivan and Myers were arrested; WorldCom’s shareholders lost $3 billion; 17,000 WorldCom workers lost their job; Arthur Andersen was shot down for shredding evidence of other accounting frauds at other firms. Cooper said that there is a price to be paid but it comes back to the values and ethics that you learn.

a. Which of Kohlberg’s six stages of moral development would you say that Cynthia Cooper had reached? Explain your answer. (15)

b. Which of Kohlberg’s six stages of moral development would you say Sullivan and Myers had reached? Explain your answer. (15)


1. Based on the Goodrich case, analyze the moral decision making process of Lawson (prior to actual testing of brakes) using the “four steps leading to ethical behavior” framework. (40)

2. John Allen Muhammed and John Lee Malvo shot and killed 13 people in United States. They used a semiautomatic assault rifle manufactured by Bushmaster Firearms, Inc. The two killers bought the rifle from Bull’s Eye Shooter Supply, a gun shop in Tacoma, Washington, although federal law prohibited the shop from selling the gun to either Muhammed, who had a record of domestic battery, or to Malvo, who was a minor. Audits by the Bureau of Alcohol, Tobacco, and Firearms showed that Bull’s Eye Shooter Supply had lost guns (238 in a three year period) or lost documentation – including its records of the Muhammed-Malvo sale – yet Bushmaster Firearms continued to sell its guns to the shop failing to adequately monitor, train and supervise its dealers.

Are Bull’s Eye and Bushmaster morally responsible for the victims’ deaths? Why or why not? Base your arguments on the theoretical background of moral responsibility and blame. (30)

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