Case Analysis & Discussion

Bernie Ebbers, the CEO of WorldCom, a major telecommunications company, was having
personal financial troubles. Ebbers pledged a large stake of his WorldCom stock as security for
some personal loans. As the price of WorldCom stock sank, Ebbers bankers threatened to sell his
stocks in order to protect their loans. To avoid having his stock sold, Ebbers asked the board of
directors of WorldCom to loan him nearly $400million of corporate assets at 2.5% interest to pay
off his bankers. The board agreed to lend him the money.
Comment on the decision of the board of directors in this situations.

The CEO of WorldCom, Bernie Ebbers should not pledged a large stake of his WorldCom
stock as security for his personal loans. If he is incapable of paying off his loans, he
shouldnt be a CEO since a CEO material person will not take such actions. Borrowing
the money from WorldCom should not be an option. Even if he did, the boards should not
approve it. The board should have just sacked Ebbers. Therefore, in this case, the board is
the main problem of this issue.
The characteristics of the board members will define the corporation, as they are
responsible in making decisions which will benefits the corporation. When one of
the board members is unethical, it can bribe and motivate other employees to
follow his/her actions. Thus, the actions can be hide easily by board members
from other shareholders of the company leading and telling them the fake truths.
The top management of WorldCom had relationships that fostered unethical behavior for
the organization. The practices of authorizing wealthy loans at shamelessly low rates, and
using company funds to pay off the CEOs personal debts were not necessarily illegal, but
unethical.
WorldCom failed because of the bad business decisions of its executives to manipulate
earnings with improper accounting entries.

Other point of view:

The reason why the board agreed to lend him money may be because of preventing
Ebbers to sell his stock and depressing the share price. Hence, it is a way that help
shareholders by keeping the shares from being sold.
However, the boards actions that prevent Ebbers to sell his stock which will
depress the share price is already unethical, since the board only focus on their
own benefits but not other stakeholders.

Note: Ebbers serve a 25 years of prison as of now and the loan went uncollected.