In the debut event for Drexel University’s LeBow College of Business Center for Corporate Governance, MCI CEO and President Michael D. Capellas told an audience of more than 160 how he instilled a culture of accountability, honesty and customer service to rebuild MCI after a $40 billion bankruptcy, the largest in U.S. business history, which followed the massive accounting fraud for which Bernard Ebbers was convicted and sentenced to 25 years in prison.
“There was an accounting restatement which was over $10 billion dollars, which one could not refer to as: ‘We have a little accounting problem’,” Capellas said of the issues that preceded him at MCI, then known as WorldCom.
Even years after Enron and WorldCom, corporate America still has work to do to overcome the damage to its reputation. Seventy-two percent of respondents to a Roper poll taken this summer believed wrongdoing is widespread.
“Drexel continues to be at the forefront in the thorough examination of corporate governance issues,” said Drexel President Constantine Papadakis. “Through the latest academic research, our Center for Corporate Governance will be a catalyst in the development of best practices for corporate responsibility.”
“Much of the general public still does not trust business,” said LeBow College Dean George Tsetsekos. “This illustrates why our Center is so necessary.”
Drexel was first university to voluntarily adopt the best practices of the Sarbanes-Oxley act for its own governance, going well beyond what the law requires of nonprofit institutions.
The Center for Corporate Governance grew out of a decision by Drexel 1951 graduate Christopher Stratakis, a prominent New York maritime attorney, to endow the Christopher and Mary Stratakis Chair in Corporate Governance and Accountability.
Business scandal “damaged our credibility and embarrassed our good name and our country all over the world,” Stratakis said during the Center’s opening event. “I therefore felt that by establishing this chair in our business college that we would perhaps begin a trend in America’s academia to place more emphasis on teaching our students morality, forthrightness and honesty in their business transactions.”
In July, Dr. Ralph Walkling, formerly of Ohio State University, was appointed the first Stratakis Chair. He is internationally known for both his research and for his ability to clearly communicate financial concepts. Walkling described the study of corporate governance as seeking an “understanding of domestic and international best practices, and trying to learn from objective empirical evidence.”
From a notorious example of what not to do, MCI has become an example of strong governance practices that have helped it to rally. In August 2005, it posted its first positive quarterly earnings statement since the bankruptcy. Its acquisition by Verizon is expected to conclude next month.
Capellas said MCI embraced the additional oversight imposed upon it after the bankruptcy. In 2003 alone, MCI delivered more than 140,000 hours of training on corporate governance topics.
Capellas instituted a set of guiding principles that all employees wear on their ID badges. Among the principles: building trust and credibility, respecting the individual, creating a culture of open and honest communication, upholding the law, and setting the tone from the top. Capellas called the latter the “absolute pillar of corporate governance.”
“No matter what you say, no matter what program you have, if you don’t personally live it, if your senior executives don’t personally live it, it just does not matter,” Capellas said.
Some other steps Capellas took to change the culture at the former WorldCom were to put an ethics hotline in place that any employee could call if they saw something they thought was improper, to require all senior managers to communicate openly and honestly with each other, and to prohibit not only conflicts of interest, but anything that would give the appearance of a conflict.
“Though our Center, we will continue to bring prominent figures like Mr. Capellas to our Campus to share insight that will benefit both our students and the business community as a whole,” said Tsetsekos, the LeBow dean.
More information on the Center for Corporate Governance is at www.lebow.drexel.edu/CorporateGovernance