The case discusses the Tyco International corporate scandal that was realized in 2002 when the national television of the U.S. showed one of the most well-known chief executive officers, Dennis Kozlowski in handcuffs after being arrested for misappropriating the company's money and concealing information from the company's board of directors and shareholders. In 2004, the former CEO Dennis Kozlowski and former CFO Mark Swartz were accused of the theft of $170 million from Tyco Corporation. However, they argued that the board of directors approved it as compensation. In 2005, Kozlowski and Swartz were convicted and the verdicts carried potential jail terms between 8 to 25 years in state prison.
Answers of Case Questions:
1. What role did Tyco's corporate culture play in the scandal? Organizational structure provides guidelines on subordination and employee responsibilities, and affects the workplace culture. In this case, Tyco's structure, decentralized corporate structure, has affected the firm's corporate culture negatively. This structure was driven by the CEO, Dennis Kozlowski, in which employees were authorized to make their own decisions without having to refer to their upper level managers for approval. Moreover, there was little interaction among the firm's divisions as each division's president reported directly to Kozlowski. However, the decentralized structure has made it difficult for the board of directors to control and monitor the firm's dealings and finance, which in return gave the employees the opportunity to serve their own benefits and interests rather than the shareholders'. By implementing such an organizational structure, Kozlowski was able to follow the steps of the former CEO, Joseph Gaziano. Therefore, Kozlowski created a corporate culture of greed and excess, secretly allowing the forgiveness of tens of millions of dollars of loans to dozens of executives to keep their loyalty. At Kozlowski's direction and without the...
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