OBM260

ORGANIZATIONAL BEHAVIOR

GROUP CASE STUDY 6 (20%)

Instructions: 3-4 students are assigned to a group. Students need to provide the correct
answers to each case study related to Chapter 6: POWER & INFLUENCE IN THE
WORKPLACE.
The students are required to:

1. Answer all 5 questions correctly. Support your judgement with relevant

material. Don’t forget to cite the resources.

2. Must have: Acknowledgement; Synopsis; Answer to that 5 Questions, and

References (more than 1).

3. Minimum page is 6 pages, maximum is 10 pages (not including appendix).

4. Left bound report (Left margin 1.5 inch, top, bottom and right 1 inch).

5. Insert page number starting from Synopsis page and end at Reference page

(Bottom Right).

6. Type your report using Arial 11, Double Spacing.

7. It must be submitted in Week 14 via online platform according to your

respective lecturer’s preferences.

OBM260/JUNE2021/
 Read the following situation and answer the questions that follow.

THE CASE OF WORLDCOM

Bernie Ebbers built WorldCom, Inc. (now part of Verizon, Inc.) into one of the world’s largest
telecommunications firms. Yet he and chief financial officer (CFO)Scott Sullivan have become
better known for creating a massive corporate accounting fraud that without anyone raising
the alarm? Evidence suggests that Ebbers and Sullivan held considerable power and influence
that prevented accounting staff from complaining, or even knowing, about the fraud.

Ebbers’s inner circle held tight control over the flow of all financial information. The
geographically dispersed accounting groups were discouraged from sharing information.
Ebbers’s group also restricted the distribution of company-level financial reports and prevented
sensitive reports from being prepared at all. Accountants didn’t even have access to the
computer files in which some of the largest fraudulent entries were made. Ebbers’s group was
devoted to performing their task to control all of the information dispersed, even though they
were aware that there could be something wrong with the situation. However, bestowed with
a lot of benefits in the company, it made them remain silent and keep doing what they needed
to do.

Another reason why employees complied with questionable accounting practices was that
CFO Scott Sullivan wielded immense personal power. He was considered a “whiz kid” with
impeccable integrity who had won the prestigious “CFO Excellence Award.” Thus, when
Sullivan’s office asked staff to make questionable entries, some accountants assumed Sullivan
had found an innovative—and legal—accounting loophole. If Sullivan’s influence didn’t work,
other executives took a more coercive approach. Employees cited incidents where they were
publicly berated for questioning headquarters’ decisions and intimidated if they asked for more
information. When one employee at a branch refused to alter an accounting entry, WorldCom’s
controller threatened to fly in from WorldCom’s Mississippi headquarters to make the change
himself. The employee changed the entry. Ebbers had similar influence over WorldCom’s
board of directors. Sources indicate that his personal charisma and intolerance of dissension
produced a led to the largest bankruptcy in U.S. history. Two investigative reports and
subsequent court cases concluded that WorldCom executives were responsible for billions in
fraudulent or unsupported accounting entries.

How did this mammoth accounting scandal occur passive board that rubber-stamped most of
his recommendations? As one report concluded: "The Board of Directors appears to have
embraced suggestions by Mr. Ebbers without question or dissent, even under circumstances
where its members now readily acknowledge they had significant misgivings regarding his
recommended course of action." The other sources also mentioned the economic conditions
at that time were influencing several politicians to get involved in the case as the money
received was funded for several important projects for the government.
Source adopt and adapted : U.S. Bankruptcy Court, Southern District of New York, In Re: WorldCom, Inc., et al., Debtors,
Chapter 11 Case No. 02-15533 (AJG), Jointly Administered Second Interim Report of DickThornburgh, Bankruptcy Court
Examiner,

OBM260/JUNE2021/
 Discussion questions (25 Marks)

1. Identify and explain power bases did Bernie Ebbers and Scott Sullivan rely on to get
away with accounting fraud? Support your answer with case study above.

(5 marks)

2. Identify any five of influence tactics did Bernie Ebbers and Scott Sullivan use to control
employees and the company’s board?

(5 marks)

3. Cited the example from the case study for each influence tactics (based on answer
from question 2).

(5 marks)

4. Did Bernie Ebbers and Scott Sullivan engage in organizational politics? Justify two
points to support your answer.

(5 marks)

5. Identify and explain the personal characteristics of Bernie Ebbers and Scott Sullivan
based on the case study above. Give an example for your answer.
(5 marks)

OBM260/JUNE2021/