Reviving WorldCom as MCI

At the recent debut event for Drexel University’s LeBow College of Business Center for Corporate Governance, Michael D. Capellas, president and CEO of MCI, recounted how he instilled a culture of accountability, honesty and customer service to rebuild the company after a $40 billion bankruptcy, the largest in U.S. business history, which followed a massive accounting fraud.

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 in the summer believed wrongdoing is widespread, illustrating the need for a Center like LeBow’s, which is dedicated to teaching and research on the best practices for governing corporations. More than 160 people turned out for the Center’s opening event.

The Center’s director is Ralph Walkling, Stratakis Chair of Corporate Governance and Accountability, who defined the study of corporate governance as seeking an “understanding of domestic and international best practices, and trying to learn from objective empirical evidence.”

Capellas described how MCI transformed itself from a notorious example of what not to do into an example of strong governance practices, which has led it to rally. In August 2005, it posted its first positive quarterly earnings statement since the bankruptcy. Its acquisition by Verizon is expected was completed this month.

Capellas received an honorary Drexel degree in 2001 while CEO of Compaq. He said MCI embraced the additional oversight imposed on it by the U.S. Securities and Exchange Commission. 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 do not personally live it, if your senior executives do not personally live it, it just does not matter,” Capellas said.

Some other steps he took to change the culture at the former WorldCom were to put an ethics hotline in place that any employee could call if he or she 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.

Capellas said talk of corporate governance often focuses on how the boardroom operates, but governance really “is about creating a culture which is open and honest, it is about engaging people at all levels of the organization. … It is not about making it like you are applying a set of rules, but that this is the way that you live your business day in and day out.”

Click here for more information on the Center for Corporate Governance and here for a listing of upcoming LeBow College events.