A fully reformed corporate enemy No. 1 could make for a fearsome competitor in the seething telecom business.

On Tuesday a court-appointed monitor released his blueprint for putting the former

WorldCom

on the path to shining integrity. Industry observers say the company, now known as MCI, has a once-in-a-lifetime chance not only to redeem itself but also to offer itself up as a model for others.

And best of all, the transformation could serve as a savvy sales pitch in an industry that hasn't exactly been known lately for high-minded devotion to employees, customers and shareholders.

"You have a company that some considered a criminal enterprise now run by a bunch of boy scouts, prepared to follow the letter of the law," says Jefferies & Co. analyst Rick Klugman. "They're selling themselves not just to regulators but to customers -- showing them that this company can be a good corporate citizen."

Though MCI's emergence from bankruptcy protection remains a ways off, the prospect of the big telco rising from the ashes with a reputation to match its solid assets could have growth-pressed rivals such as

AT&T

(T) - Get Report

and

Verizon

(VZ) - Get Report

quaking.

Finding a Cure?

The report, called "Restoring Trust" and penned by former

Securities and Exchange Commission

Chairman Richard Breeden, codifies many of the practices that critics of corporate America have called for in response to a seemingly endless string of scandals. While WorldCom's collapse into Chapter 11 last summer was among the most sordid cases, corporate governance plans have been called into question at other blue-chip names including

Tyco

(TYC)

,

Qwest

(Q)

and, of course,

Enron

TheStreet Recommends

.

Breeden's rehab plans call for the separation of the CEO and chairman positions, the creation of four board committees staffed entirely by independent directors, 10-year term limits on directors and auditors, dividends giving shareholders a quarter of annual profits, and a $15 million cap on executive pay and stock packages.

Of course, the plan comes at a company that became notorious for its failure to defend the rights of any stakeholders at the expense of fat-cat-minded executives. Indeed, "One cannot say that the checks and balances against excessive power within the old WorldCom didn't work adequately," the Breeden report notes. "Rather, the sad fact is that there were no checks and balances."

And in that regard, recent events have shown the company still has a long way to go. On July 31 MCI was temporarily barred from competing for government contracts because of its poor internal controls. On the other hand, success could pay dividends in an industry that has been hard hit during the last two years by scandals involving many of its top names, from Bernie Ebbers to Jack Grubman.

Shine 'Em Up

Perhaps the most dazzling part of Breeden's report is the squeaky-clean sheen it could put on the new MCI. Breeden was appointed by the bankruptcy court to recommend changes to the company's governance practices.

After revelations of a $9-billion-plus accounting scandal, a plunge into Chapter 11 and the wholesale purge of the executive ranks, MCI stands to become a formidable born-again phone company with little debt, leading technology and fresh-scrubbed corporate image.

Breeden's suggestions, such as keeping the CEO's cronies off the board's compensation committees and considering a salary cap, may strike a chord with shareholders. The past year saw some hefty payouts to telecom executives despite miserable corporate performances.

Gary Forsee jumped from

BellSouth

(BLS)

to

Sprint

and won a $37 million contract.

Lucent's

(LU)

CEO Patricia Russo found it hard to say no to the $55 million dangled to lure her into the top job from

Kodak

.

And who can forget the Verizon duo of Chuck Lee and Ivan Seidenberg, who took top industry salary honors in 2002 with their $15.6 million and $9.5 million pay packages. The

gravy train didn't stop there for Lee, who signed on as a $3 million-plus-perks consultant to Verizon when he retired last year.

It would be oddly fitting if WorldCom could emerge as a leader in business ethics.

"It's really about accountability," says Jefferies' Klugman. "The problem is that companies have a tendency to do things they can get away with. For WorldCom, it's very important to show that it had bad executives, but that it is not a bad company."