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CASE STUDY 10-1: THE RISE AND FALL OF WORLDCOM Case Synopsis This case study describes how former Worldcom CEO Bernie Ebbers and his chief financial officer (CFO) Scott Sullivan perpetrated a massive corporate accounting fraud that led to the largest bankruptcy in U.S. history. The case provides evidence from government investigation reports that Ebbers and Sullivan were able to orchestrate this fraud through various influence tactics and their underlying power bases. Suggested Answers to Case Questions 1. What power bases did Bernie Ebbers and Scott Sullivan rely on to get their way with accounting fraud? Ebbers and Sullivan were powerful in a few ways: (a) Information power. Both held tight control over the flow of all financial information, which framed how others viewed the situation and prevented them from recognizing the wrongdoing. (b) Expert power. The case states that Sullivan was considered a “whiz kid” with impeccable integrity who had won the prestigious “CFO Excellence Award.” When his office asked staff to make questionable entries, some accountants assumed Sullivan had found an innovative—and legal—accounting loophole. (c) Referent power. Ebbers was considered charismatic, so much so that the Board accepted his ideas without question or dissent. (d) Coercive power. The case states that Ebbers and his executive team used punishment -- or threats of punishment -- to get their way. 2. What influence tactics did Bernie Ebbers and Scott Sullivan use to control employees and the company’s board? The influence tactics used can be derived directly from the sources of power described above. Ebbers would have used silent authority and occasionally assertiveness. Both Ebbers and Sullivan would have relied on persuasiveness, the former with his charisma and the latter with his expertise to aid the persuasive attempts. Both relied on information control; they manipulated access to information for the purpose of changing their attitudes and/or behaviour. There is little or no evidence that the other forms of influence were used. 3. Did Bernie Ebbers and Scott Sullivan engage in organizational politics? Why or why not? Organizational politics is a perception of the intent of influence tactics, but most students will quickly agree that these two leaders engaged in political tactics because they did so for their own benefit. However, a few students might suggest that although legally and ethically wrong, Ebbers’ and Sullivan’s use of influence to engage in accounting fraud would not be organizational politics because the two genuinely wanted to improve the financial status and growth of their organization, rather than only for personal gain.
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