Tyco International- Corporate Malfeasance
Tyco International- Corporate Malfeasance
Case Summary
Tyco began in 1960 when it was founded by Arthur Rosenberg and started as an investment holding firm. In 1973 Joseph Gaziano took over for Rosenberg as CEO and pursued many hostile acquisitions. He was successful and was able to grow the company to a net worth of $140 million before he passed away in 1982. The CEO who took his place was John Fort who came in with the basic strategy of maximizing shareholder wealth through dramatically cutting costs. When John Fort left his position in 1992, Tyco was comprised of Fire Protection, Electronics, and Packaging departments. Dennis Kowalski was able to work his way to the top of Tyco and take the CEO position in 1992. Kowalski began as an aggressive CEO looking to acquire businesses that were in synergy with Tyco. He succeeded with this by diversifying the company with 1,000 acquisitions by 2002. Throughout the peak of his reign at Tyco the stock price soared from only $5.00 in 1992 to $62.00 in 2001. Although, what investors did not know and should have legally known, was that Kowalski and Swartz had so much influence over the board of directors that they were able to hide substantial amounts of money which they gave to executives throughout the company. In the end, Kowalski stepped down as CEO in June of 2002 when it became evident that he was stealing money from the company. He and Swartz (CFO) were convicted of grand larceny, conspiracy, and fraud and were sentenced to 8-25 year prison sentences in June of 2005. This could have been prevented if the corporate governance structure was not so overpowered by these two individuals.
Situational Analysis
Industry Attractiveness Analysis
Tyco now has many different main industries that it does business in. Although, there is not enough space to cover all of them so I will use two of the most important industries. They are fire protection, and electronics industries. It is very important to use the five
Case Summary
Tyco began in 1960 when it was founded by Arthur Rosenberg and started as an investment holding firm. In 1973 Joseph Gaziano took over for Rosenberg as CEO and pursued many hostile acquisitions. He was successful and was able to grow the company to a net worth of $140 million before he passed away in 1982. The CEO who took his place was John Fort who came in with the basic strategy of maximizing shareholder wealth through dramatically cutting costs. When John Fort left his position in 1992, Tyco was comprised of Fire Protection, Electronics, and Packaging departments. Dennis Kowalski was able to work his way to the top of Tyco and take the CEO position in 1992. Kowalski began as an aggressive CEO looking to acquire businesses that were in synergy with Tyco. He succeeded with this by diversifying the company with 1,000 acquisitions by 2002. Throughout the peak of his reign at Tyco the stock price soared from only $5.00 in 1992 to $62.00 in 2001. Although, what investors did not know and should have legally known, was that Kowalski and Swartz had so much influence over the board of directors that they were able to hide substantial amounts of money which they gave to executives throughout the company. In the end, Kowalski stepped down as CEO in June of 2002 when it became evident that he was stealing money from the company. He and Swartz (CFO) were convicted of grand larceny, conspiracy, and fraud and were sentenced to 8-25 year prison sentences in June of 2005. This could have been prevented if the corporate governance structure was not so overpowered by these two individuals.
Situational Analysis
Industry Attractiveness Analysis
Tyco now has many different main industries that it does business in. Although, there is not enough space to cover all of them so I will use two of the most important industries. They are fire protection, and electronics industries. It is very important to use the five