Bmw Case
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WorldCom as an organization did not have a strong corporate culture. It was more of an autocratic style with a top down attitude of a firm where the employees were expected to follow the orders of their superiors without question. The firm had grown mainly by acquiring other smaller firms over a period of time. The firm was also highly focused on the revenue generation rather than creating long term value for the shareholders. The CEO had a misplaced aim of being the No.1 on the stock market rather than the market leader which also led them to enter into long term lease contracts with high termination costs for relatively poor short term revenue benefits.
Since this was a short sighted strategy which only worked until the industry as a whole was growing with the main motive to maintain a low expense to revenue ratio. However, when the telecom and the internet industry crumbled, there was huge pressure on revenues and cost pressure came from the long term lease contracts. Further the firm was under pressure to maintain E/R ratio at 42% while also trying to grow the top line – as these parameters were monitored by the analysts. There was also feeling that the CEO and the other directors would lose everything if the performance did not improve. All this led the company to cook the books.