Ethics Essay examples

2056 Words Sep 30th, 2014 9 Pages
Our case study discusses the rise and fall of one of the largest telecommunications corporations in the world, Nortel Networks Corporation. Nortel was one of the many early 21st century telecommunications companies that failed due to upper echelon management, a dysfunctional board of directors, inflated costs and earnings, and a smoke and mirrors illusion of stability. There were many avenues that could have been taken that would have prevented the demise and fall of the organization, but those roads were not traveled. Many argue that government intervention could have prevented the backlash and whitewater effect of Nortel’s bankruptcy, but due to corporate ties within the government and the Securities and Exchange Commission the many …show more content…
Perhaps the largest mechanism to better align managers and shareowners is executive and shareowner compensation and stock options. According to Anson, White, McGrew, Butler, (2004), there are several principles that should be implemented in regards to compensation; an executive compensation program should be designed to ensure the alignment of long-term interests between the executive management and the shareowners, a compensation program should consist of a combination of cash and equity-based compensation, and the executive compensation program must be transparent. Stock option plans are another key feature of a well-designed organization. Companies that have stock options that are top heavy and not designed the same for shareowners are a good indication that management has looked after its own self-interest.
The meltdown of Nortel was more of a people failure than a capitol market process failure. When Nortel executives began expanding their skill base and acquiring other venture capital organizations, they set the tone for failure. They also broke principle three of the Caux Principles for Responsible Business in that they weren’t always truthful to their shareowners and economic backers and there was no sense of organizational justice. By splitting Nortel’s growing enterprise into various divisions and decentralizing R&D, the Nortel brass created a series of individual business teams…

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