Organisational decline and turnaround: Insights from the Worldcom case by Satish C. Pandey
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2005
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In 2002, the entire globe was rocked by the WorldCom accounting scandal that led to the fourth-ranked Fortune 500 telecom company to the bankruptcy and raised several questions in relation to corporate governance, ethical leadership and corrupt practices in American companies. The consequences of this famous scandal led to unrest in investors, pension funds, banks and the general public at large. Later, the company appealed to US court for reorganization under chapter 11 of US bankruptcy code and under leadership of the new CEO, Michael Capellas, the new company (MCI) not only reconsolidated its financial position but also overhauled all its internal systems and transformed itself from a corrupt company to an ethical company. This article presents insights learnt from this case study in the context of managing organizational turnaround. It also focuses on the role that the new chief executive played in initiating ethical work culture in the organization. The authors have used Chowdhury’s four stage theory to analyze the case. They have further tried to integrate insights from other theoretical models to focus on both the process of turnaround and the role of ethical leadership in bringing about the turnaround.