In 2002 WorldCom went bankrupt after an accounting fraud was discovered. An executive announced: ‘WorldCom had overstated a key measure of earnings by more than $3.8 billion over five quarters, dating back to January 2001. The Company’s reported profits, it turned out, were really losses. I will assess this case by explaining morally wrong behavior from the functional perspective.
First of all let’s note the irregularity which occurred in given financial statements. WorldCom said that an internal review uncovered huge hidden expenses – mostly line charges that it pays to other telecom carries – that were characterized as capital investments, a gimmick that boosted its profits.
The functional perspective assesses the meaning of morality from its function within society conceived of as a system, geared at survival, stability, and growth. First I will describe the kind of sphere WorldCom is active in to get an idea which moral prescriptions could be possibly be important to determine morally wrong conduct.
WorldCom was active in a modern well-ordered-society and encountered every day the properties of the free market. The reasons behind the concept of a free market are economic, the basic reason for advancing the market is that it stimulates productivity, frugality, efficiency, and economic growth, both in relation to the humans directly involved and in relation to society at large.
Because the executives of WorldCom were fraudulent on a mass scale they should have known that this could have lead to bankruptcy. This action violates the functional perspective that the free market should stimulate economic growth, both in relation to the humans directly involved and in society at large. The plunge in WorldCom shares did cost investors a staggering $175 billion; causing economic shrinkage to society at large. So I conclude that from a functional perspective the executives of WorldCom acted morally wrong.
Background Article
2 comments:
I do agree that Worldcom acted morally wrong. However, I don’t agree with your argument that they acted morally wrong because they violated the principle that the free market should stimulate growth. This case is a problem of moral motivation. Worldcom was fraudulent because they were acting in accordance with the business discourse, which focuses on maximizing profit. However they violated the moral discourse. The executives of Worldcom knew they were fraudulent, thereby deceiving other people. From the functional perspective we should ask the question if the principle ‘do not deceive’ is necessary to constitute a free society. The answer will be yes. Since the moral discourse has priority over the business discourse in this case, I think that is the argument why Worldcom acted morally wrong according to the functional perspective.
I would like to elaborate on the comment which student 892134 previously made regarding this case.
I think that you have a very good point in the sense that the moral discourse is more important than the business discourse. You stated that the moral discourse is violated because the executives of WorldCom consciously deceived other people.
However, I would like to add that this is not the only reason why the moral discourse was violated in this situation. The moral discourse namely articulates that it is an agent's duty to obey the law. Therefore, not only did WorldCom's executives behave morally wrong because they deceived other people consciously; they at the same time consciously disobeyed the law, which can be considered as even a more fundamental violation of morality's discourse.
Remy Schoenzetter (ANR 887823).
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