The Organization

Rarely can ethical and unethical corporate actions be attributed solely to the personal values of a single managers. The values adopted within the organization are highly important, especially when we understand that most people are at the level two stage of moral development, which means they believe their duty is to fulfill obligations and expectations of others, Consider, for example, accounting managers at WorldCom, which disintegrated in a $ 11 billion fraud scandal.

WorldCom started out as a small long distance company and rapidly became a dazzling star during the late 1990s Wall street telecom boom. Just as rapidly it all came crashing down as one executive after another was hauled on conspiracy and securities fraud charges.

For Betty Vinson and Troy Normand, first signs of serious trouble came in mid 2000 with the telecom industry in a slump. Top executives were scrambling to meet Wall Street’s expectations for the quarter. Vinson and Normand’s boss Buford Yates, called the two into his office and broke the news. CEO Bernard Ebbers and Chief financial officer Scott Sullivan had asked that they make some highly questionable accounting adjustments – to the tune of $ 828 million – that would reduce expenses and boost the company’s earnings for the quarter. Although the managers were initially shocked by the request and resisted they eventually agreed to go along. Despite the misgiving they and Yates all felt, the accountants continued to make increasingly irregular adjustments over the course of six quarters clinging to a hope that each one would be the last.

Top executives persuaded these managers who were all known as hard working, dedicated employees that their gimmicks would help pull WorldCom out of its troubles and get everything back to normal. A colleague of Vinson’s said she felt that she needed to go along with her bosses requests despite her own concerns. To assuage her guilt, the colleague said that Vinson rationalized that CFO Sullivan had been hailed as one of the country’s top chief financial officers. Therefore if he thought the transfers and other gimmicks were all right she wasn’t the one to question it.

When WorldCom’s problems exploded into public view, Yates Normand and Vinson found themselves in the middle of the largest fraud case in corporate history. All three eventually pleaded guilty to conspiracy and securities fraud, which will likely result in jail time.

Vinson, Normand and Yates were not unscrupulous people. All three had misgivings about what they were doing, but they contained to go along with their superiors’ requests . All ethical decisions are made within the context of our interactions with other people and the social networks within an organization play an important role in guiding other people’s actions. For most of us, doing something we know is wrong becomes easier when everyone else is doing it. In organizations the norms and values of the team, department or organization as a whole has a profound influence on ethical behavior. Research has verified that these values strongly influence employee actions and decision making. In particular corporate culture as described, lets employees know what beliefs and behaviors the company supports and those it will not tolerate. If unethical behavior is tolerated or even encouraged it becomes routine. For example, an investigation of thefts and kickbacks in the oil business found that the cause was the historical acceptance of thefts and kickbacks. Employers were socialized into those values and adopted. In may companies employees believe that if they do not go along their jobs will be in jeopardy or they will not fit in. Culture can be examined to see the kinds of ethical signals given to employees. High ethical standards can be affirmed and communicated through public awards and ceremonies.

Excerpts from New Era Management

  • Tapankumarbanerjee

    Eye opener