Rise and Fall of Nortel Initially Engaged Essay
- Length: 8 pages
- Sources: 1
- Subject: Business
- Type: Essay
- Paper: #43589898
Excerpt from Essay :
Rise and Fall of Nortel
Nortel initially engaged in telecommunications and expanded its business to a net gear for them to uphold competitiveness. The affiliation was performing exceptionally in 2000 when it garnered 37% of the stock exchange in Toronto. Nortel progressed through aggressive procurement with analysts purporting that it was sustainable. Norton hailed as an exemplary and successful affiliation in Canada. Accounting irregularities and poor management resulted in Nortel's stock prices declining rapidly in 2001 (Markarian, Magnan & Fogarty, 2009). Nortel's frail unethical management practices pursued improper directives in fraudulently embezzling company funds, over-paying benefits to executives, merging with other unsuccessful affiliations and being overly aggressive in its endeavors. This explication covers its rise and fall among other concerns addressing recovery from such mistakes.
Norton's Rise and Fall
The formation of any affiliation focuses on its goals and objectives. Stakeholders ought to begin implementing measures that enhance an organization's mission and objectives for eventual success. For a long period, numerous management personnel and stakeholders in diverse affiliations have discovered that the upholding of ethical principles is among the best incentives that aid any prospective organization or company to experience profitability and augmented performance. Various factors that constitute the ideal factors of an affiliation implicate on organizational performance.
Such factors include compensation of executive members of the organization, management of earnings, structure of ownership and governance structures on the board. It is extremely beneficial for such factors to elicit collaboration and observation of business and ethical values. Any company whose workforces strictly observe and uphold ethical principles always experience success. In accordance with information from the given case study, it is clear that its rise and decline is because of unethical practices and malicious handling of the company's finances and shares.
Nortel experienced advancement in its trading and businesses because the capital and consumer market was receptive of hardworking stakeholders who aimed at realizing profitability and the organization's mission, vision and objectives. The imminent decline of the organization is because of unethical practices within its workforces that are inclusive of excessive managerial compensation, frail organizational governance, minimal commitment by the owners and unethical financial accountability. Such mishaps resulting in the fall of Nortel are common to other companies and result to failures. Social responsibility is under derailment because of stakeholders' activities. Stakeholders' activities depict severe drawbacks of the agency framework (Markarian, Magnan & Fogarty, 2009).
Factors Contributing to Rise and fall
Information from the case study of Nortel Company unraveling the establishment and performance of the affiliation depict that, in 2000, the company posted exceptional profitability and performance. Market capitalization exceeding 350 billion dollars characterizes this exceptional performance. This growth enabled the affiliation to take possession of over 37% of the stock exchange (Markarian, Magnan & Fogarty, 2009). The success and rise of networking and the broadband connectivity docket of the company was exceptionally impressive since it extended to other local and worldwide affiliations.
The breakup of Nortel with AT & T. was a significant success factor that necessitated and promoted its development and popularity. When Nortel broke from partnerships with the AT & T. affiliation, it gained more control over the telecommunication and internet business. Because of the rapidly augmenting cellular market that expanded to telecom manufacturers, Nortel gained immense success from its gargantuan sales. Evidently, Norton succeeded since because of the abrupt increase of its mobile subscribers who generated income for the affiliation.
Norton's success also resulted from the extension and expansion of the affiliation to introduce personal computers by multinational companies such as IBM and Macintosh. Provision of unlimited internet to its business and home subscribers immensely promoted the eventual success of Norton. Such an expansive market elicited the growth of Nortel. The rise of Norton further came through the emergence of other multinational telecommunication affiliations that were under privatization, which generated more market for Nortel. Such factors proved advantageous in improving and strengthening of the corporation. An additional increase in share prices produced financial advantage to Nortel, standing at 200 dollars (Markarian, Magnan & Fogarty, 2009).
Nortel experienced a significant downfall after its achievements, and its decline came within a short time. The management of Nortel and its stakeholders exhibited poor policing and governance that elicited a pitfall to the company. Notably, they were unable to safeguard the performance and establish profitability. Managers contributed immensely by involving themselves in aggressive acquisition. They sought mergers with lowly performing affiliations such as the San Francisco bay network affiliations that commanded a substantial share of the corporation.
Managers defied warnings from the market and financial analysts by spending magnanimous amounts of energy and capital in unsuccessful firms. Remittance of payment to executive management personnel also elicited imminent failure to Nortel. The executive members of the corporation immensely contributed to failure because they claimed immense payments and benefits. This situation augmented in spite of the rising cases of doubt that faced the Nortel Company. Notably, compensation of the CEO surpassed the compensation system of other multinational affiliations (Markarian, Magnan & Fogarty, 2009).
Nortel had a dysfunctional framework of directors who failed to exercise their duty in the best fashion. Numerous analyses regarding the Nortel Corporation depict irregularities in financial accountability reports. Fraudulent behavior of various members of its workforce resulted in the affiliation experiencing multiple losses. Stakeholders of the Nortel Corporation played a role in the destruction of the company through their indeterminate formulation and implementation of goals that were short-term. It is succinct that the decline of Nortel resulted from actions by its team players and mostly the leadership and ownership. Untimely decisions to merge with other companies proved detrimental to the success of Norton (Markarian, Magnan & Fogarty, 2009).
Alignment of Interests
It is notably pertinent for an affiliation and its management personnel to appreciate the apprehension of ethical principles. This is pertinent because it promotes the development of performance and business principles. The ideal measure for Nortel Company regards the adoption of strict and moral principles within its business activities. Always, management of affiliation theories has advocated for the teaching and promoting of right ethical behavior in the management teams. Ethical operations necessitate safeguarding of stakeholder interests in the affiliation. The reason of appreciating ethical principles is for purposes of identifying ideal initiatives that would govern the execution of duties. Such duties are for selfish gains.
Multiple analyses of performance of Nortel have revealed immense disparities, which leads to violation of shareholders' interests. Nortel company's managers and accountants among other executive directors performed their duties and roles based on rationality approaches. Ideal management of the affiliation necessitates the application of ethics in business and observation of initiatives that maximize the success of the company. This is in opposition to the quality of conducting vices that maximize individual gain. Appreciation of ethical principles among workforce members is the ideal way of realizing stakeholder interests.
Other incentives encompass the alignment of executive income with the industrial requirements and the issue of adopting the analytical ideas from external market examination. Accountants in the affiliation ought to uphold existent GAAP standards in preparation of monetary record. This is because it has an effect of decreasing disparities in the affiliation that result in declining performance. With such a succinct alignment of managers and shareholders' interests, a conflict of interests is apparently impossible. Proper alignment ensures ethics in work and generates numerous benefits to individuals and the corporation.
Meltdown of Nortel
Records from a variety of sources have depicted that the dramatic meltdown of Nortel Company occurred in 2002. During this period, the world market experienced a magnanimous reduction in the economic performance of agents because of the imminent monetary crisis. Though the decline of Nortel occurred during the time of the financial crisis, the factor of worldwide monetary crisis did not elicit the fall of Nortel. The implications and contributions of the global crisis also truncated the price of shares to 0.68 dollars from 200 dollars. This decline was substantial and elicited devaluation of shares (Markarian, Magnan & Fogarty, 2009).
The parties involved with the administration and operation of the organization caused the fall of Nortel. The personnel surrounding the company, such as managers contributed to this downfall because of their unethical practices in the discharging of managerial duties. Practice of unethical behaviors within the working environment of Nortel Corporation resulted into its decline. The company administration proceeded to remit hefty compensations to its executive members and failed to harmonize their payment system with that of other affiliations of the same status.
This directive was critically disadvantageous because it resulted in excessive spending and embezzlement of company funds on unimportant incentives, which reduced profitability. Improper acquisition and premature mergers of Nortel with other affiliations of unequal size pitted Nortel to an endless trail of quandaries. Nortel merged with such companies because of their interests to augment their market scopes and income. The greatest quandary was merging with an unsuccessful affiliation that possessed limited market shares. This initiative caused the company to lose its income to unproductive grounds.
Nortel merger with affiliations that…