Corporate Character Individual Res As Term Paper

Excerpt from Term Paper :

WorldCom (CEO Bernard Ebbers) supported by years of profitability arising from the deregulation of phone companies was a fast moving stock that was highly toted by stock specialists as a must buy, even while it was seriously hemorrhaging from bad and fraudulent business deals and its own shoddy accounting, cover ups and bad investment deals.

WorldCom quickly supplanted at&T as the favorite of many investors, based heavily on Grubman's recommendations. The investment world quickly sang WorldCom's praises as a result. A technology magazine, Network World, named it one of the ten most powerful companies, behind only Cisco and Microsoft. After listing its virtues, the magazine went on to conclude that, "MCI WorldCom will probably be a keeper on this list." 18 as for its investment virtues, Grubman claimed that it was a traditional "widows and orphans" stock, to be held for the long-term. Based partially upon his recommendations, Fortune listed WorldCom as one of its ten "safe harbor" stocks; those that should reward its investors' faith in good times and bad. "There are few, if any, companies anywhere in the SP 500 that are as large as WorldCom... that have [its] growth potential... this company remains the must-own large-cap stock for anyone's portfolio," Grubman stated unequivocally. 19 Within three years, it would file the largest Chapter 11 proceeding in corporate history after being involved in a massive accounting scandal.

WorldCom knowing it was having problems, like Enron only on a much larger scale continued to allow the investment community to build its character to maintain the income created by exchanges and then again like Enron tried to cover its tail.

Bernard Ebbers, former CEO of MCI WorldCom Inc., was sentenced to twenty-five years in prison on nine counts of securities fraud and conspiracy, a sentence actually below the minimum level recommended by the Guidelines. See United States v. Ebbers, 458 F.3d 110, 129 (2d Cir. 2006) (expressing regret at the harshness of the Guidelines, noting that "[t]wenty-five years is a long sentence for a white collar crime, longer than the sentences routinely imposed by many states for violent crimes, including murder, or other serious crimes such as serial child molestation").

Again like Enron, the individual on top was sanctioned but no real compensation was offered to stakeholders who had lost so much in their own limited gamble with a company that was repeatedly misrepresented as safe and sound. The outcome of these two main fraud cases has to a large degree seriously effected the manner in which the public views corporations and more importantly has left all other companies, big and small to deal with new regulations that change completely change the manner in which they do business and provide accounting for it.

The final case study has to do with a company that did not disband and in fact has grown stronger since the development of its ethical scandals challenged it some years ago. This case is the Nike Corporation which was charged not with crimes but with unethical business practices, i.e. skirting U.S. labor laws by contracting labor to companies in nations where no such laws exist. Again it must be stressed that individuals in the business stressed profit above responsibility to create profit. This may be the "climate" of a business but it cannot be the ultimate responsibility of the corporation because the corporation did not act individuals did.

Dalla Costa provides one of the most amusing and substantial demonstrations of the struggle Nike has had in the past with corporate social responsibility and public image, as well as some anecdotal and amusing explanations of its generation as a multinational player in the industry.

Nike is one of many companies having a social conscience imposed on it. This organization creates products for the imagination as well as for the feet, but not many remember that it has also overcome enormous odds. A small start-up using a waffle iron to create rubber soles, Nike beat out globally entrenched giants...for all its momentum, Nike has responded with such insouciance to questions about labor abuses at the off-shore companies to which it contracts manufacturing that it is starting to stink like an overused pair of running shoes.... The points I want to make now are that, first, Nike pledged at its 1996 annual meeting to set up a formal audit system to check on its contractors, and, second, this decision was forced on it by its own shareholders. Figuring out how the very people being enriched by Nike turned on it to demand action that could cost them future profits is an exercise in understanding the power of dissonant voices.

Given the development of corporate codes of conduct in many organizations Nike's history, as detailed above is one of a struggle to develop a code of conduct in a reversal of historical trend and clearly at some resistance. Fast forward to 2008 and one can see an additional article that details just how successful Nike has been in the last ten years at reshaping its public image, and if it is truly in line with audit information regarding oversees and domestic operations.

Nike is the largest athletic shoe company in the world. Even after the recent merger between Reebok International Ltd. And Adidas AG, Nike still controls more than 36 per cent of the athletic shoe market in the United States and more than 33 per cent of the global athletic footwear market (Petrecca and Howard, 2005)....In 2004, the company had about U.S.$12.2 billion in revenues, of which U.S.$6.5 billion came from footwear sales and U.S.$3.5 billion from apparel (Nike, 2005). In 2004, Nike products were manufactured by more than 800 suppliers, employing over 600,000 workers in 51 countries. Nike employs only 24,291 direct employees, the vast majority working in the United States. All other workers are employed by independent suppliers.

Nike then has the challenge of creating a corporate code of conduct that either includes or excludes contract employees or employees of other corporations that do its heavy lifting for it. Despite early resistance Nike has made changes that are unprecedented in the global outsourcing economy, applying such rules and minimum ages (18 for shoes 16 for apparel) for employees in suppler companies and demanding that these companies live up to OSHA standards that are not traditionally applied oversees and in fact constitute one of the major resource barriers to developing manufacturing in the U.S., or an impetus for outsourcing. It then becomes clear that the argument of if changes in the business climate support, independently, the actions of individuals in the business?

Richard, Kochan, Romis & Qin offer a full reiteration of Nike's code of conduct, and demonstrate ways in which the code is expanded by audit actions on the part of the company and compliant or incompliant contract suppliers. These individual contractors and the managers of those contracted agencies are then ultimately accountable for the actions of the group and if they do or do not enforce the code of conduct regulations set up by Nike. There is a sense that Nike has a way to go with regard to establishing fair labor practices in all contract supplier companies, it is in a period of successful change, especially when compared to other multi-national corporations, often seeking outsourcing as a way to avoid CSR in the international arena. The conclusion is then that yes, the corporate "climate" is an enforceable aspect of change to individual behavior, yet like the tax law changes that came out of the Enron and WorldCom scandals such actions are preventative and not punitive and ultimately the decisions made to create action are that of the individual.

The Public Cries Foul

Though the courts took unprecedented action against Enron and WorldCom executives and the public had its way with Nike many believe it was not enough and to many players got off scot free while many others were stranded without savings and were without jobs. The judges, as one can see from the above statements regarding the sentencing of CEOs at Enron and WorldCom felt that the punishment was worse than the crime, and tried to set precedence by reducing the sentencing to less than minimum for the charges the executives were convicted of. While the public cried foul and reiterated its desire to see far more culpability. In a sense the outcome of these two scandals was far more than almost any cases in the past but the public is unaware of this. The public pressure died when the corporations died, as the public had no retaliatory ability against a dead entity. Nike on the other hand was pressured by a public outcry to solve its ethical dilemmas and resolve its standards. Individuals within Nike are then asked to act within the code of conduct and contract employers are held to a different set of standards. Employees are made aware of the code of conduct as are contractors and are…

Sources Used in Document:


Beauchamp, Tom. L. Bowie, Norman. E. Ethical Theory and Business 7th Ed. New York: Prentice Hall, 2003.

Dalla Costa, John. The Ethical Imperative Why Moral Leadership Is Good Business. Reading, MA: Perseus Publishing,1998.

Fox, Loren. Enron: The Rise and Fall. Hoboken, NJ: Wiley, 2003.

Geisst, Charles R. Wall Street: A History: from Its Beginnings to the Fall of Enron. New York: Oxford University Press. 2004.

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