Essay on Worldcom

1595 Words Jun 27th, 2016 7 Pages
Restoring Trust in WorldCom

1. What are the three or four central objectives that Breeden hopes to achieve with the proposals in “Restoring Trust”? Why is reform needed? What are the benefits? What are your concerns regarding the reform?

The WorldCom Corporate Monitor, Richard Breeden, believed that in order to correct the ills that faced the company, WorldCom needed to adopt a strong Corporate Governance structure. The central objectives of his proposal “Restoring Trust” included improving the composition of WorldCom Board, eradicating financial misconduct, correcting executive compensation and enhancing shareholder influence and involvement.
According the Breeden the WorldCom board seemed to have a decent combination of backgrounds
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To correct the financial pitfalls of the company, Breeden required members of the Audit Committee to have strict financial expertise and demonstrate appropriate behavior. He proposed that the committee hold eight meetings per year, two of which included the General Counsel. Previously, the Audit Committee spent only three to six hours a year overseeing the financial activities of the organization with annual revenue in the tens of billions. Breeden sought to bring the internal audit department; the CFO and the finance team together in the same physical location where they were previously geographically separate. These changes would be beneficial, as it would improve internal communication and increase the involvement of the Audit Committee in the financial operation and reporting of the company. The Audit Committee would be responsible for reviewing the performance of the CFO as well as the external auditors. Breeden believed the more transparency the Audit Committee had the more accountability it would be able to place on the Financial Team, leading to better financial reporting practices.
One of the more direct mandates given to Breeden by the court was to prevent excessive executive compensation. Ebbers was able to buy the loyalty of the board members by issuing retention grants as well the issuance of

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