WorldCom’s Crisis Of Ethics: Triumph Of Managed Storytelling

11 Pages 2760 Words

As “an epic year of corporate skullduggery” (Levinstein & Smith, 2003) ended, telecommunications giant WorldCom settled its differences with the Securities and Exchange Commission [SEC] in a settlement that presiding judge Jeff Rakoff characterized as “a model” for corporate fraud cases” but Citizens Against Government Waste dismissed as “a slap on the wrist” (Hill, 2002). Although it required WorldCom to be more sedulous in future financial reporting and left open the option of future civil fines, the settlement did not ask the company to admit guilt for overstating its income in 1999 and early 2000 by more than $9 billion (U.S. SEC, 2002).
The reputation damage sustained by WorldCom qualifies as a crisis of meaning, defined by Zak (1999, p. 272) as a situation in which “previously functional practices of communication and techniques of persuasion break down, proliferating disbelief when informed consensus is demanded.” The critical element in functional organizational communication, Zak notes, is the ability of leadership to construct viable stories that capture and promote the organization’s ways of being, knowing, learning, and experiencing (1999, p. 16). It is my contention that WorldCom’s central narratives, while compelling to American business culture as a whole, created internal tensions that led to the organization’s self-destruction; moreover, that the quick recovery of WorldCom has rested on the skill of its new leadership in constructing a compelling replacement narrative.
The remainder of this paper is divided into three parts. Part 1 provides an overview of the events surrounding WorldCom’s financial imbroglio. Part 2 reviews the key elements of narrative as an organizational leadership technique. Part 3 analyzes the WorldCom situation in three parts: pre-crisis, crisis, and post-crisis.
WorldCom’s Financial Imbroglio
At the beginning of 2001, WorldCom was the second largest company in t...