Organize your paper as follows, with these section headings:

I. Summary of Situation (length: .5 – 1 page): Summarize the situation. What happened? Don’t focus too much on the technical details (e.g., the specific accounting practices). Don’t give a step-by-step description of the sequence of events. Instead, imagine you are trying to explain what happened to someone with no business experience. What would you say?

First, set the scene that leads up to the accounting fraud. Describe WorldCom and its general situation at the time. What is WorldCom like as a company? How is the company organized (e.g., the composition of the board of directors and its relationship with the company; the company’s relationship with Arthur Anderson, its external auditing firm)? What is WorldCom’s business model or strategy? How are things going financially, for the company and for the broader telecommunications industry?

Second, describe the accounting fraud itself. Who are the key figures and what role did they play? You do not need to describe the specific accounting practices in detail. You also do not need to explain why each person did what he or she did (that would be causal analysis – you can save that for the causal analysis section). Instead, you should just summarize the series of actions that led to the fraud being committed and ultimately reported.

Finally, end by briefly identifying the key stakeholders of WorldCom (i.e., who is impacted by the operation of the company and thus has a stake in its success or failure?)

II. Normative Analysis (length: 2-3 pages): In this section you should use concepts from class to evaluate the people in question and explain why what they did was, or was not, ethically wrong. Did anyone violate their fiduciary duties and if so, how? How were stakeholders impacted?

The Fraud
The purpose of this section is for you to explain why the fraudulent accounting and other behavior described in the case was ethically wrong. What makes it wrong? To do so you should use the concepts from class. Think about fraudulent accounting in general (not just this case, specifically). Why is it wrong?

Those in charge at WorldCom had an ethical responsibility to its shareholders (this responsibility has a name!) and perhaps also to other stakeholders (e.g., employees, customers, potential investors, society as a whole). How does fraudulent accounting (e.g., misrepresenting financial performance to make a company look more valuable than it actually is) affect these various stakeholders? For example, from the perspective of shareholders, why is this so bad (how are shareholders impacted)? From the perspective of potential investors, why is this so bad (how are potential investors impacted)? From the perspective of society, why is this so bad (how is society impacted)?

After explaining the impact on various stakeholders, you could take a stance on whether or not you think the company has an ethical responsibility to take these various consequences (for non-shareholders) into account or whether the impact on shareholders should be their sole concern (recall the Friedman/Mackey debate).

Other Behavior
Apart from the fraudulent accounting, were there any other ethical violations? Think carefully about fiduciary duty (and its different types). Do you see any other instances where someone violated their fiduciary duties? If so, describe and explain.

III. Causal Analysis (length: 2-3 pages): In this section your job, you should use concepts from class to explain why things happened the way they did. Apply the concepts you’ve learned in the course. What elements of moral or social psychology were operating here? Did you see anything like this situation in any of the cases we have read, or the situations we have discussed during the course?

Here are some key concepts that may be relevant (this is not a comprehensive list) normative social influence, informational social influence, ambiguity, escalation/slippery slope, bounded ethicality, ethical fading, motivated blindness, discounting, overconfidence bias, conflict of interest, confirmation bias, moral foundations (e.g., concerns about harm, fairness, loyalty, and respect for authority), corporate governance.

Note: Do not attempt to mention every single possibly relevant concept from class (or the above list). It would be better to pick a few factors/concepts that you think are most important and then explain, clearly and thoroughly, what they are and how they contributed to the fraud.

IV. Ethical Systems Design (length: 2-3 pages): If you were in charge of a company like WorldCom, how could you apply concepts from class to prevent situations like this from arising? More generally, how could you change the rules, norms, or other aspects of the environment so that the organization was less prone to this sort of ethical problem in the future?

These recommendations should follow directly from the causal factors you identified in the previous section. For example, if your causal analysis focused on how factors X, Y, and Z were the primary reasons for the accounting fraud, you should suggest ways that the company could be changed to lessen (or eliminate) the influence of factors X, Y, and Z. Be concrete! If you think some aspect of the company can be improved, explain the specific, concrete steps you will take to change it. It is not enough to say, for example, “I will make the corporate culture better.” How exactly will you make it better? And why will your plan work? How would your plan address the needs/rights of key stakeholders?

Organize your paper as follows, with these section headings:

I. Summary of Situation (length: .5 – 1 page): Summarize the situation. What happened? Don’t focus too much on the technical details (e.g., the specific accounting practices). Don’t give a step-by-step description of the sequence of events. Instead, imagine you are trying to explain what happened to someone with no business experience. What would you say?

First, set the scene that leads up to the accounting fraud. Describe WorldCom and its general situation at the time. What is WorldCom like as a company? How is the company organized (e.g., the composition of the board of directors and its relationship with the company; the company’s relationship with Arthur Anderson, its external auditing firm)? What is WorldCom’s business model or strategy? How are things going financially, for the company and for the broader telecommunications industry?

Second, describe the accounting fraud itself. Who are the key figures and what role did they play? You do not need to describe the specific accounting practices in detail. You also do not need to explain why each person did what he or she did (that would be causal analysis – you can save that for the causal analysis section). Instead, you should just summarize the series of actions that led to the fraud being committed and ultimately reported.

Finally, end by briefly identifying the key stakeholders of WorldCom (i.e., who is impacted by the operation of the company and thus has a stake in its success or failure?)

II. Normative Analysis (length: 2-3 pages): In this section you should use concepts from class to evaluate the people in question and explain why what they did was, or was not, ethically wrong. Did anyone violate their fiduciary duties and if so, how? How were stakeholders impacted?

The Fraud
The purpose of this section is for you to explain why the fraudulent accounting and other behavior described in the case was ethically wrong. What makes it wrong? To do so you should use the concepts from class. Think about fraudulent accounting in general (not just this case, specifically). Why is it wrong?

Those in charge at WorldCom had an ethical responsibility to its shareholders (this responsibility has a name!) and perhaps also to other stakeholders (e.g., employees, customers, potential investors, society as a whole). How does fraudulent accounting (e.g., misrepresenting financial performance to make a company look more valuable than it actually is) affect these various stakeholders? For example, from the perspective of shareholders, why is this so bad (how are shareholders impacted)? From the perspective of potential investors, why is this so bad (how are potential investors impacted)? From the perspective of society, why is this so bad (how is society impacted)?

After explaining the impact on various stakeholders, you could take a stance on whether or not you think the company has an ethical responsibility to take these various consequences (for non-shareholders) into account or whether the impact on shareholders should be their sole concern (recall the Friedman/Mackey debate).

Other Behavior
Apart from the fraudulent accounting, were there any other ethical violations? Think carefully about fiduciary duty (and its different types). Do you see any other instances where someone violated their fiduciary duties? If so, describe and explain.

III. Causal Analysis (length: 2-3 pages): In this section your job, you should use concepts from class to explain why things happened the way they did. Apply the concepts you’ve learned in the course. What elements of moral or social psychology were operating here? Did you see anything like this situation in any of the cases we have read, or the situations we have discussed during the course?

Here are some key concepts that may be relevant (this is not a comprehensive list) normative social influence, informational social influence, ambiguity, escalation/slippery slope, bounded ethicality, ethical fading, motivated blindness, discounting, overconfidence bias, conflict of interest, confirmation bias, moral foundations (e.g., concerns about harm, fairness, loyalty, and respect for authority), corporate governance.

Note: Do not attempt to mention every single possibly relevant concept from class (or the above list). It would be better to pick a few factors/concepts that you think are most important and then explain, clearly and thoroughly, what they are and how they contributed to the fraud.

IV. Ethical Systems Design (length: 2-3 pages): If you were in charge of a company like WorldCom, how could you apply concepts from class to prevent situations like this from arising? More generally, how could you change the rules, norms, or other aspects of the environment so that the organization was less prone to this sort of ethical problem in the future?

These recommendations should follow directly from the causal factors you identified in the previous section. For example, if your causal analysis focused on how factors X, Y, and Z were the primary reasons for the accounting fraud, you should suggest ways that the company could be changed to lessen (or eliminate) the influence of factors X, Y, and Z. Be concrete! If you think some aspect of the company can be improved, explain the specific, concrete steps you will take to change it. It is not enough to say, for example, “I will make the corporate culture better.” How exactly will you make it better? And why will your plan work? How would your plan address the needs/rights of key stakeholders?