write a essay 2000words

Running head: ORGANIZATIONAL THEORIES 1

ORGANIZATIONAL THEORIES 2

Lingyun Feng（13681794）

Organizational Theories

Organizations are expected to adhere to several set rules that govern how they operate or relate with one another. Markets provide different rules and regulations depending on the type of organization under question and the industry of operation. It is, therefore, prudent that companies follow or adhere to as certain way of doing things to avoid conflict with the regulators and consumers. Although organizations try as much as possible to stay within the limits of the law, there are others which are tempted to break laws. Sorensen and Miller (2017) state that high competition in some sectors may tempt companies to overlook regulations that seem to limit their ability to compete effectively. Ignoring such laws can have adverse effects on different players such as the stakeholders, consumers, and the company itself. Organizational theories provide different ways that organizations can be studied and explained. Through organization theories, researchers can understand how companies operate and some of the reasons that cause such companies to overlook the laws that are supposed to guide them. WorldCom is one of the companies that is responsible for the shocking and widespread fraud that have been witnessed in wWall sStreet. This paper discusses the questionable organizational and management practices that led to the WorldCom scandal as well as how accountable they were for their actions. Comment by Joshua Dymock: Make sure you proofread your assignment carefully before you submit it, as this will help you find and correct small mistakes such as this. A good way to proofread is to read the assignment out loud, as this slows down your reading and makes it more likely that you will see mistakes. Comment by Joshua Dymock: This section is quite long for an introduction. I would consider trying to condense this to 2 or 3 sentences. Comment by Joshua Dymock: This is a good statement of the purpose of your paper. It would be good to add another sentence which outlines your “thesis”, which means your position (or evidence-based opinion) on the topic. In this case, your thesis might outline what you consider to be the main causes of these questionable organizational practices. It’s also common to use your introduction to outline the structure of your assignment. Eg. The paper will begin by examining……….It will then discuss XXX and YYY. Finally, some recommendations will be given regarding………..

Sorensen and Miller (2017) assert that the WorldCom scandal was the largest and most shocking scandals that had ever been witnessed before 2001. The company, which was the largest telecommunication company in the world at the time, tried to inflate earnings on its financial statements by almost $4billion (Gür, 2018). The manipulation of its financial data not only affected the company but millions of shareholders who had invested a large portion of their money in the company because of its positive performances. The company was also a core dividend paying stock, meaning that many retirees held the stocks in their portfolios. The ripple effects of the manipulation of financial data means that people like the retirees lost their hard earned money. WorldCom leaders knowingly carried out fraudulent accounting. () states that the Chief Financial Officer (CFO) for the company at that time, Scott Sullivan, deliberately applied the accrual method wrongly. Comment by Joshua Dymock: Again, careful proofreading would help you spot small mistakes such as this one, where you have used a plural form to describe something that you previously described as an individual event.

It is important to first understand the accrual method in accounting before understanding how the WorldCom scandal was executed. When companies acquire assets, accounting rules dictate that the cost of the expenses should be allocated over the period in which they will benefit the company (Gür, 2018). The accrual method is, therefore, the matching of revenues with the cost incurred to generate the revenue over a certain period. For example, if a company acquires a machine for $7500 and it earns annual profits of $10,000 it is supposed to spread the cost of the machine over the years it is supposed to benefit from the machine. For example, if the machine is expected to last for five years, and it improves productivity by twice the normal rate, its entire cost of acquisition should not be accounted in only one year. Accounting the costs in one year will mean that the company will only take $2500 profits in a year. When an investor looks at the financial information, they will wonder why the profits have fallen so much. Instead, accounting principles require the company to spread the cost of acquiring the machine over the five year period in which it is set to benefit the company. Therefore, the company will incur annual costs of $1500 for the five years, meaning that its earnings will be $8500 every year. Such financial entries allow investors to get an accurate picture of how a company is doing and its economic reality. Comment by Joshua Dymock: This is a good topic sentence that helps guide the reader through the structure of your paper. Comment by Joshua Dymock: Is this your example or did this come from another source? If it came from another source, you need to include a citation. Comment by Joshua Dymock: Is all of this information your own, or has it come from another source?

Instead of adhering to accounting practices, the Chief Financial Officer for WorldCom, he took out the company’s operating expenses and spread them across property accounts (Gür, 2018). Property accounts are one of the major types of a capital expense account. The strategy allowed the company to report smaller expenses over a long period instead of entering them immediately in their financial statements. In 2001, the company had already inflated revenues by almost $4 billion as a result of accounting malpractices (Sorensen & Miller, 2017). Even though the method was sustainable at the start, it came to a time when it was not sustainable and the company was forced to file for bankruptcy in July 22, 2002. Filling for bankruptcy led to increased scrutiny of its financial statements since it is not normal for a company that is posting positive performances to suddenly file for bankruptcy (Sorensen & Miller, 2017). The bankruptcy also led to investigations of the company’s executives, especially its CEO Bernard Ebbers and Scott Sullivan, who was the CFO. The investigations found Ebbers guilty of nine counts of security fraud and he was handed a 25 year jail sentence (Sorensen & Miller, 2017). Sullivan, on the other hand, was found guilty of seven counts of security fraud and was sentenced to five years after taking a guilty plea. Since many people had been affected by the scandal and others like the Enron Scandal, the government came up with the Sarbanes-Oxley Act (SOX) aimed at increasing confidence in the financial markets and the financial statements released by public companies. Comment by Joshua Dymock: Are you confident that this has been adequately paraphrased (i.e. written in your own words)?

Reasons for the Questionable Organizational and Management Practices

Organizational Ethics

One of the reasons that contributed to the scandal was fear of accountability on the part of the company’s management. Mcleod, Payne, and Evert (2016) state that the company had already started posting negative results before the commencement if the scandal. The management did not want to scare away investors and resorted to poor financial practices to portray an image of a positively performing company (Batten, Lončarski, & Szilagyi, 2018). The ethical and moral dimension theories can clearly explain why WorldCom’s top leaders knowingly allowed such a scandal to continue. Organizational ethics refer to the standards and principles by which companies operate (Reference). Organizational ethics are demonstrated through acts of compassion, honor, integrity and responsibility. Business ethics helps companies to fairly treat all its stakeholders and avoid any practices that may negatively affect them (Reference). Comment by Joshua Dymock: Again, this is an excellent topic sentence that makes clear to the reader the purpose and content of this paragraph. Comment by Joshua Dymock: When given a definition of a key term, it’s best to use a quotation to show the reader where the definition came from.

Financial and business ethics is one of the major aspects of organizational theory that influence the operation and performance of organizations. Batten et al. (2018) state that business leaders have the moral obligation to run clean and transparent operations when it comes to finances, investments and the expansion of companies. Since ethics deals with human behavior and what is morally right or wrong,. Eethical norms cover different areas such as accountability, honesty, integrity, fairness and justice. Financial ethics, therefore, requires business leaders and managers to be honest, transparent and trustworthy when executing different financial procedures (Mcleod et al., 2016). For example, finance officers are required to make accurate entries in their financial statements so as to give investors a clear picture of a company’s performance. From the analysis of the WorldCom case, it is evident that its leaders deliberately manipulated financial information. The company’s CFO collaborated with other leaders like the CEO to misrepresent expenses thus portraying a picture of a company on a positive trajectory. It is evident that there was a lack of financial and business ethics in WorldCom. The fact that its leaders could knowingly engage in financial malpractices indicates a lack of an ethical code of conduct in the company. Even though there was an ethical code of conduct, there is high probability that it was enacted for formality purposes and was not followed.

The leaders of WorldCom were unethical because they engaged in financial malpractices without thinking about how their actions would affect other people. As a result of their actions, the company was declared bankrupt and eventually collapsed. Most of the investors that had trusted the company with their life savings also lost their money, further affecting them.

Batten et al. (2018) state that adherence to organizational ethics would have prevented leaders from committing the fraud. Organizational ethics would have helped the leaders to be honest and transparent in their reporting of financial information. The CFO and the CEO would, therefore, have released the correct financial information even if the company was not performing as expected. The release of the correct financial information would have prevented many of the effects of the scandal. For example, the company’s leadership together with the stakeholders would have come up with strategies to turn around the company’s performance. Additionally, the adherence to business and financial ethics would have prompted the company’s leaders to report accurate financial information soon as possible.

Organizational Culture

Having a culture that is based on widely shared and strongly held beliefs that are supported by structure and strategy is one of the components of organizational success. Strong organizational culture presents many different benefits to companies. For example, a strong organizational culture helps employees to know what is expected of them by the top management. A strong organizational culture also helps employees know that the response expected of them is a proper one and that they will be rewarded for adhering to the values of their organizations. Comment by Joshua Dymock: What evidence do you have for this claim? It would be good to include a citation here to support your claim. Comment by Joshua Dymock: Again, what evidence do you have to support this claim?

Companies must, therefore, ensure that they come up with a string culture that provides a strategic competitive advantage and adheres to the widely held beliefs and values about what is expected. A strong organizational culture has many benefits like fewer conflicts, efficient decision making, enhanced trust and improved company image. Company leaders are important in the shaping of organizational culture. Company leaders who do not fit in their organization’s culture are more likely to fail in their work or destroy a company’s reputation (Camelia, Ioana-Valentina-Alexandra, & Larisa-Andreea, 2019). Therefore, before hiring executives, companies must ensure that they hire qualified leaders with the skills and experience required to fit in the company culture. Comment by Joshua Dymock: Do you mean “strong culture”? Comment by Joshua Dymock: Are these all your own ideas, or has this information come from other sources? If it has come from other sources, you MUST include appropriate citations.

Camelia et al. (2019) state that every organization must have its unique culture. Organizational culture is derived from basic assumptions about human nature, the relationship of the organization to its environment, the right emotions, and effectiveness. When it comes to human nature, organizations need to investigate the nature and behavior of people. Organizations must ascertain whether people are inherently good or bad, proactive or reactive and mutable or immutable. These considerations help in the creation of beliefs on how employees, suppliers and customers are required to interact and how they should be managed (). Organizations should also investigate how they interact with their environment to effectively define their business and their constituencies. Comment by Joshua Dymock: This seems highly problematic. How can a company investigate whether a person is inherently good or bad?

From the analysis, it is therefore evident how important organizational culture is. There are several benefits that come with a string organizational culture. A strong organizational culture gives employees a sense of direction since they know what is expected of them. Employees that work in a company with a strong organizational culture do not need to be constantly managed because they know that it is their responsibility to adhere to organizational values (Setyaningrum, 2017). Such employees also strive to adhere to organizational values because it means recognition and possible rewarding. Having employees that know what is expected leads to improved productivity and efficiency of services, leading to improved company performance. From the analysis of the case study, it is evident that WorldCom did not have a strong organizational culture because employees diverted from their company’s values and rules and regulations governing their industry. The CFO together with the CEO deliberately flouted accounting principles in an attempt to hide their inefficiencies when it comes to the management of a company as large as WorldCom (Setyaningrum, 2017). The lack of a strong organizational culture made it possible for the company’s leadership to execute the fraud without anyone noticing and reporting to the relevant authorities. The results were the bankruptcy of the company and its eventual collapse. Comment by Joshua Dymock: Make sure you proofread carefully!

Camelia et al. (2019) state that a strong organizational culture is important because it leads to increased motivation among employees. Well defined values are essential when it comes to making employees enjoy their work and helping them find their purpose and fulfill their professional goals. A strong organizational culture gives employees a sense of purpose and motivates them to execute their functions to the best of their abilities. A study carried out by () established that organizations with a sting culture experience 41% les case of absenteeism and a 17% increase in productivity. The WorldCom case study reveals that there was low morale within the company (Camelia et al., 2019). The fact that the company’s leadership had to resort to fraud to post positive performances demonstrates that productivity was at an all time low and was probably caused by the lack of motivation. The company’s employees may have lacked role models to look up to thus losing the sense of purpose. Comment by Joshua Dymock: It’s a bit hard to know what this paragraph is adding to your overall argument, beyond what you’ve already said about organizational culture? It’s starting to sound a bit repetitive. What is the purpose of this paragraph?

In summation, it is evident that the WorldCom scandal would have been avoided through the application of business ethics and the right organizational culture. The WorldCom scandal was the largest and most shocking scandals that had ever been witnessed before 2001. The company, which was the largest telecommunication company in the world at the time tried to inflate earnings on its financial statements by almost $4billion. The manipulation of its financial data not only affected the company but millions of shareholders who had invested a large portion of their money in the company because of its positive performances. The application of financial and business ethics would have prevented the scandal from happening. Through financial and business ethics, WorldCom’s leaders would have seen that it is unethical to manipulate the company’s financial statements. The application of a strong organizational value would also have increased morale and productivity among employees, hence getting rid of the need to manipulate financial information. Comment by Joshua Dymock: Since you’ve used headings in other parts of your paper, it would be good to have the heading “Conclusion” here. Comment by Joshua Dymock: This is an extremely strong claim. We can’t be certain that this would have ensured avoiding the scandal. Usually in academic writing we soften our claims because we can rarely be certain that something is definitely true. In this case you could say: “may have been avoided” Comment by Joshua Dymock: As above, this is a very strong claim.

References

Batten, J. A., Lončarski, I., & Szilagyi, P. G. (2018). When kamay met hill: Organisational ethics in practice: JBE. Journal of Business Ethics, 147(4), 779-792. doi:http://dx.doi.org/10.1007/s10551-017-3435-4

Camelia, G., Ioana-Valentina-Alexandra, M., & Larisa-Andreea, N. (2019). Organizational culture: a case study of the impact of ethical organizational culture on the efficiency of accor hotels. Romanian Economic and Business Review, 14(2), 86-96. 

Gür, E. (2018). Accounting professional ethics. Adam akademi Sosyal Bilimler Dergisi = Adam Academy Journal of Social Science, 8(2), 371-407. doi:http://dx.doi.org/10.31679/adamakademi.443323

Mcleod, M. S., Payne, G. T., & Evert, R. E. (2016). Organizational ethics research: A systematic review of methods and analytical techniques: JBE. Journal of Business Ethics, 134(3), 429-443. doi:http://dx.doi.org/10.1007/s10551-014-2436-9

Setyaningrum, R. P. (2017). Relationship between servant leadership in organizational culture, organizational commitment, organizational citizenship behaviour and customer satisfaction. European Research Studies, 20(3), 554-569. 

Sorensen, D. P., & Miller, S. E. (2017). Financial accounting scandals and the reform of corporate governance in the United States and in Italy. Corporate Governance, 17(1), 77-88. doi:http://dx.doi.org/10.1108/CG-05-2016-0125