Tyco International: Leadership Crisis
Being in a high ranking position doesn’t mean one can take advantage of its power. The executive officers of Tyco faced numerous charges because they abused their power over the company and used it for their own benefit. The company’s board of directors should have manage and prevented this kind of situations most specially their role is to protect the firm’s shareholders from inappropriate or unethical situations. As a result, they faced consequences for their unethical behavior which is the decentralization of the corporate structure. The misconduct of Dennis Kozlowski, the former chairman of Tyco and Mark Swartz, the former CFO lead them 30 counts of corruption, conspiracy, fraud, conspiracy, grand larceny, and falsifying business records. While Mark Belnick , the former general counsel was charged of obscuring $14 million. 2.)
The scandal of Tyco happened in the rise of Kozlowski as the new CEO of Tyco. He greatly admires his friend, mentor, and previous CEO of Tyco, Joseph Gaziano. His style also became extravagant and lavish like his mentor. He had also implemented the company jets, extravagant vacations, company cars, and country club memberships. Due to Kozlowski’s aggressive approach to business, it had led to Tyco’s many scandals. Even the board of directors is finding it difficult to monitor the company’s dealings and finances due to the decentralized corporate structure of Kozlowski. Kozlowski had picked his corporate governance team. All the employees he picked know his management style. The leaders of Tyco had shown characteristics of a psychopath. They focused more on the wealth that they will gain rather than serving the company. Disregarding the feelings of the people, they shot down at those who will accuse Tyco, including Jeanne Terrile at Merrill Lynch and David Tice, the one who questioned Tyco’s use of large reserves. They also have no second thought in eliminating segments of the company that do not generate profit. It was due to Kozlowski’s unethical leading method that caused the scandal of the company. Both Kozlowski and Swartz were arrested for stealing more than $170 million from the company. They were also accused of stealing more than $430 million through fraudulent sales of Tyco stock and concealing all information from the shareholders. The unethical behavior that Kozlowski and Swartz had shown caused the investors to lose their trust in the company. Under the new management of Edward Breen, he launched a review of the company’s accounting and corporate governance practices to determine whether any other fraud had occurred. And to gain back investors’ trust, he reorganized a new management team and recovered the funds purportedly taken by Kozlowski. He assigned Eric Pillmore as the Vice President of Corporate Governance. And under his guidance, he incorporated three elements into Tyco’s culture, namely: •
Strong and ethical corporate leadership
The Boards of Directors are responsible for protecting Tyco's shareholders interest. However, some of the board members were not aware of the fraud, and other unethical deals that were going on behind the scenes. The board members that were aware, who were particularly the CFO and the legal counsel that were chosen by CEO L. Dennis Kozlowski himself, did not bring the issues to the other members of the board, therefore, they were just as guilty of unethical behaviors as the CEO and his direct reports. The reason behind this could have transpired is probably due to the majority of board members being on the board for more than 10 years, in which relationships have been established over time. The CEO, CFO and legal counsel, due to the nature of their positions, were not honest and transparent with the stakeholders concerning the issues relating to the accounting fraud and conflicts of interest. They all engaged in an enterprise of corruption and...
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