Tyco

Topics: Tyco International, Dennis Kozlowski, Corporate governance Pages: 5 (1757 words) Published: September 19, 2013
Introduction
This story begins with a brief history of Tyco, followed by an explanation of Tyco CEO L. Dennis Kozlowki’s rise to power. As Kozlowki rose to become the second-highest-paid CEO, some red flags pointed toward the impending disaster. Most notably, Kozlowski’s aggressive approach to business, his lavish lifestyle, his clashes with the former, more conservative CEO, and his ousting of those who criticized Tyco’s activities all acted as indicators of Kozlowki’s unethical behavior. (Tyco International: Leadership in Crisis (2003). Company History

Tyco was founded in 1960, by Arthur J. Rosenberg, Tyco initially an investment and holding company focused on solid-state science and energy conversion. It developed the first laser with a sustained beam for use in medical procedures, than shifted the focus to the commercial sector. In 1964, Tyco became a publicly traded company and rapidly acquired 16 companies by 1968. The expansion continued until 1982, between 1973 and 1982, the firm grew from $34 million to $500 million in consolidated sales. In 1982 Tyco was organized into three business segments: Fire Protection, Electronics and Packaging. (Tyco International: Leadership in Crisis, 2003). Tyco continued to grow though acquisitions through the 1990’s. The company changed its name to Tyco International, to signal its global presence. By the early 2000’s the company had acquired more than thirty major companies, including ADT, Raychem and CIT group (Tyco International: Leadership in Crisis, 2003). The Kozlowski Era

The story of the Tyco Corporation is nothing short of the type of drama you would watch on the movie of the week, money, power, lavish lifestyles. L. Dennis Kozlowski, armed with an accounting degree, joined Tyco in 1975, where he spent the next 27 years rising through the ranks as an exceptionally enterprising and effective manager (Dennis Kozlowski. (2013). The Biography Channel website). Kozlowski found a friend and mentor in then CEO Joseph Gaziano. Kozlowski, he was impressed by Gaziano’s lavish lifestyle, company jets, extravagant vacation and country club memberships. Gaziano’s reign abruptly ended when he died of cancer in 1982. Kozlowski thrived under Gaziano. John F. Fort III was Gaziano’s successor, his management style was sharply different. Fort was analytical and thrifty. His Goal was to increase profits for shareholders and cut the extravagant spending characterizing Gaziano’s tenure, Wall Street responded positively to Tyco’s new direction (Tyco International: Leadership in Crisis, 2003). Kozlowski focused on helping to achieve Fort’s vision of putting shareholders first. He soon gained Fort’s attention and was promoted to president of Grinnell fire Protection Systems Company, Tyco’s largest division. He reduced overhead, eliminated 98 percent of paperwork, slashed manager’s salary, but designed a bonus compensation package that gave them greater control over possible earnings. He publically recognized both high and low achievers at yearly banquets. He became the company’s president and later CEO (Tyco International: Leadership in Crisis, 2003). After disagreements with Kozlowski regarding, direction, speed of growth and rapid changes , Fort resigned as CEO in 1992 and later as Chair of the board, although he remained on the board of Directors until 2003. Kozlowski’s Tyco Empire

At age 46 Dennis Kozlowski, found himself at the helm of Tyco International. He owned many homes, lived a lavish lifestyle and worked in an aggressive management style. He recognized that one of Tyco’s major shortcomings was its reliance on cyclical industries, which tend to be sensitive to economic ups and downs. Because of this, he made even more acquisitions, such as in Kendall Company a manufacturer of medical supplies which had declared bankruptcy two years earlier. Kozlowski revived the business and doubled Tyco’s earnings. Kozlowski, was rewarded with a $2.1 million dollar salary and company...

References: 1. Dennis Kozlowski. (2013). The Biography Channel website. Retrieved 01:33, Sep 10, 2013, from http://www.biography.com/people/dennis-kozlowski-234610.
2. Tyco Details Lavish Lives of Executives (2002). The New York Times website. Retrieved 11:10am, Sep 11, 2013, from http://www.nytimes.com/2002/09/18/business/tyco-details-lavish-lives-of-executives.html
3. Tyco International: Leadership in Crisis (2003). Daniels Fund Ethics Initiative University of Mexico Retrieved 11:11am Sep 11, 2013 http://danielsethics.mgt.unm.edu/pdf/Tyco%20Case.pdf
4. Tyco Leadership; (2013) Retrieved 1:51pm Sep 11 2013 http://www.tyco.com/about/leadership
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