...Daniels Fund Ethics Initiative University of New Mexico http://danielsethics.mgt.unm.edu Tyco International: Leadership Crisis INTRODUCTION On September 12, 2002, national television showcased Tyco International’s former chief executive officer (CEO) L. Dennis Kozlowski and former chief financial officer (CFO) Mark H. Swartz in handcuffs after being arrested and charged with misappropriating 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 the information from shareholders. The two executives were charged with more than thirty counts of misconduct, including grand larceny, enterprise corruption, and falsifying business records. Another executive, former general counsel Mark A. Belnick, was charged with concealing $14 million in personal loans. Months after the initial arrests, charges and lawsuits were still being filed—making the Tyco scandal one of the most notorious of the early 2000s. This case 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. This analysis...
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...Ethical Decision Making and Leadership October 17, 2011 Tyco Case 1. What role did Tyco’s corporate culture play in the scandal? Tyco’s corporate culture played a huge role in the scandal. From the beginning when Kozlowski worked under then CEO Joesph Gaziano, he was impressed by the extravagant lifestyle that his friend and mentor portrayed. Once his mentor passed in 1982 an a new CEO was put in place for Tyco, Kozlowski still desired to follow in Gaziano’s footsteps even if he had to take some cues from the new CEO, John F. Fort III. Rising up the corporate ladder, Kozlowski maintained an aggressive approach that concerned Fort. This concern lead to the board of directors siding with Kozlowski’s theory that the firm should continue to acquire profitable companies that met guidelines which lead to an ousting of Fort and establishing Kozlowski as the new CEO of Tyco once Fort resigned. 2. How did Dennis Kozlowski have the opportunity to steal $137 million in unauthorized bonuses? Kozlowski had the opportunity to steal $137 million in unauthorized bonuses because he controlled a decentralized firm, where he as the CEO was also the board chair. Also he was allowed to handpick his own board of directors, by choosing trusted individuals and placing them in key positions, instead of having the shareholders take a vote for them. 3. Why is Kozlowski, now a prisoner for a long time, unrepentant about his conduct as CEO of Tyco? Kozlowski feels that he did no wrong. Even though...
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...low interest and interest-free loans from the company for personal use. This is yet another case of corporate executives abusing their positions of trust and putting themselves and their checkbooks above the interests of the company shareholders 2. Where was Dennis Kozlowski born? What college did he attend? How did he pay for his college expenses? He was born in Newark, New Jersey. He attended Seton Hall University. He paid for his college expenses by waiting tables and playing guitar in a band. 3. What was his first job at Tyco? Nine years later he was ??? Then in 1989 he was??? And in 1992 he was appointed???? He worked as an internal auditor at Tyco. Nine years later he was running a division called renel Fire protection, which made fire sprinklers. In 1989 he was chief operating officer of Tyco. In 1992 he was appointed to CEO. 4. When Dennis was appointed CEO how did he plan to expand the Tyco empire? He was appointed CEO in 1992 and he expanded the Tyco empire through a series of strategic mergers and acquisitions. 5. What was the nickname for Dennis on Wall Street? Deal-a-month Dennis 6. Why did Wall Street like Tyco? Where was Tyco headquarters located? Wall Street liked Tyco's relatively small overhead. Tyco headquarter was located in New Hampshire. 7. How do you break into the New York social scene? What happened...
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...Andrea Carter Case Study “Tyco: I’m Sure That It’s a Really Nice Shower Curtain” Columbia Southern University The author discusses the financial situation of Tyco in regards to the top management misusing funds and falsifying financial documents. The authors’ overall viewpoint seems to be that Tyco’s CEO, CFO, and some of the accountants were constantly trying to evade paying taxes or stealing money from the company for personal use. The company was made out to look bad in the public eye from this article and almost as if they didn’t have a good judge of character when it came to hiring CEO’s, CFO’s, etc. This bad judgment of management picks put the company in a financial bind and caused significant decreases in the market capitalization. The investigation into all of this was time consuming but to many it seemed as if justice prevailed in the end. I think that Kozlowski’s motivation for avoiding sales taxes was that he was simply being greedy for money and trying not to let the company know that he was using their funds to purchase all of these personal items. He knew that on purchases that large, the sales tax would be just as costly and this was his way of scheming to not pay it. The text states that, ‘Business ethics can be defined as the collective values of a business organization that can be used to evaluate whether the behavior of the collective members of the organization are considered acceptable and appropriate” and it was very clear that Kozlowski did not...
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...Read Case Study 20, 'Tyco: I'm sure that it’s a Really Nice Shower Curtain.' Summarize the overall viewpoint of the author, and discuss the major issues presented in the case. Review the Questions for Thought. Answer these three questions using the business ethics principles from the textbook (See attachments). Your summary of the author's viewpoint and your discussion of the major issues presented in the case must be in paragraph form. However, your responses to the three Questions for Thought can be answered either in paragraph form or as a numbered list. There is no minimum word count requirement for this case study. You will be graded on your summary of the author's viewpoint, your discussion of the ethical issues facing Tyco, and your responses to the questions. Remember, if you paraphrase or quote words or ideas from your course textbook or other resources, you should cite your sources following the APA style citation guidelines. Summary: The author discussing, "Tyco's I'm Sure It Was a Nice Shower Curtain main points were compensation levels, amount of debt acquired from the acquisitions and decrease in stock levels. Dennis Kozlowski started with Tyco shortly after graduating college. He worked with them since the 70's. He was the CEO for a decade. During this time, he became comfortable with the organization, board of directors and its employees. He met and worked with many subordinates that shared the same views and corporate goals. "He was trying to build Tyco into...
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...Tyco: I’m Sure That It’s A Really Nice Shower Curtain. Tyco’s CEO Dennis Kozlowski, in 2000 was considered the highest paid CEO in America with an income of $105 million. Kozlowski started his journey at Tyco as an internal Auditor on 1975 and by 1992 he was the CEO of Tyco International. Like any other CEO, I believe Kozlowski just wanted to grow his company and be the best he could be. His bold statement of wanting to be the next General Electric evidences this point. He grew the company from a $2 billion company when he assumed power to a conglomerate with a market capitalization of $120 billion and annual sales of $36 billion. I believe in the midst of all this success, Kozlowski began to feel too important and too greedy. When he began manipulating documents to cover up his dirty tracks and wasn’t penalized, it made him feel more invincible to authorities. Being the highest paid CEO in the country at the time, you would think $1 million in taxes shouldn’t be a problem. But dislike for taxes and his greedy nature probably prompted him to evade on the taxes for the artwork. Kozlowski was convicted in 2005 for purchasing artwork for approximately $14.7 million with Tyco funds for his personal use, receiving $81 million in unauthorized bonuses and also for paying hush money to any employee with knowledge of the scheme he was carrying out in the company. Kozlowski’s decision to try and evade the New York taxes on the artworks he purchased was what blew the scheme wide...
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...According to the Tyco website, Tyco originated as a Tyco Laboratories a United States government research laboratory company. Today Tyco has three independent companies: Tyco Healthcare, Tyco Electronics, and Tyco International consisting of five different business segments. Flow Control, Electrical and Metal products, Fire Protection Services, Safety Products, and ADT Worldwide are the five business segments under Tyco International’s umbrella. Tyco is a vertical structure with levels of hierarchy. The board members and top management are responsible for governing its’ mission and goals while ensuring the organization’s five principles are enforced. Tyco expects each employee to strive for excellence and work as a team. Tyco’s leadership team directs employees to be innovative, openly communicate, and continue to improve their skills. The company focuses on equality and fair treatment for employees. Management and staff are accountable for their actions and work performance. Tyco promotes safety in the workplace. Tyco protects each location by the companies anti-violence, drug and alcohol free workplace policy. Tyco promotes individual and corporate integrity, each person including leaders are to uphold the organization’s standards of integrity with each other, customers, and other stakeholders (Tyco, Peoples & Values, 2010). Vertical structure is the most common business structure; however, many organizations are restructuring their organizations. The restructuring makes...
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...HAROLD F. HOGAN, JR. Tyco International On October 6, 1995, Tyco International, a diversified U.S. conglomerate, received some very unflattering news. A respected investor monitoring organization, the Council of Institutional Investors (CII), had included the firm in its list of the 20 worst-performing S&P 500 companies. CII generated its list annually, based on a mechanical formula that calculated total shareholder returns over a five-year period.1 One commentator described the annual rankings as “the corporate equivalent of being put on the school detention list.”2 The choice of Tyco as one of the 20 culprits was quickly challenged. Tyco’s own management described the result as an artifact arising from an abnormally high share price during a narrow window at the start of CII’s measurement period. Robert Monks, head of Lens, Inc., an activist money management firm and former member of Tyco’s board of directors, also took exception to the report. In a letter of protest to the executive director of CII, Monks asserted that based on his own experience, he believed Tyco was a responsible company fully committed to enhancing shareholder value. He wrote: “On balance we conclude that this is a first-rate company successfully adding value in the difficult mode of a conglomerate. Our criteria [for evaluating] companies ultimately is—what can we, as informed and effectively involved owners, do to enhance value? Our answer in the case of Tyco is—virtually nothing. What...
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...“Forensic Accounting” is a term that you do not hear every day so let’s examine its definition. The Strayer University BUS508 textbook defines accounting as, “The process of measuring, interpreting, and communicating financial information to enable people inside and outside the firm to make informed decisions.” Merriam-Webster defines forensic as, “suitable for a court of law.” Our textbook defines forensic accounting as, “Forensic accounting is accounting performed in preparation for legal review.” The textbook also describes it as, "focus on uncovering potential fraud in a variety of organizations.” The Business Dictionary defines it as a, “Criminal investigation practice whereby investigators analyze financial documents and activities to determine if and how a crime, such as fraud, has been committed by an organization. Tactics include tax analysis, financial reporting review and banking activity oversight.” This also includes white collar crimes such as embezzlement, stock market manipulation and price fixing schemes. This can include the financial impact of marketplace events, such as intellectual property infringement, anti-trust actions, financial reporting fraud, asset impairment and business valuation (Neumann, O'Connor, 2008). It also includes matters of family law, such as matrimonial disputes. In short, "Forensic accounting is the use of accounting, auditing, and investigative skills to assist in legal matters.” They use accounting skills following the GAAP (generally...
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...Abstract According to the phase 2 individual project assignment instructions, each student is asked to look at two scenarios and answer the related ethical questions following each one (CTU Online, 2013). Additionally, it is asked that each student provide a discussion on the new GAAP guidelines for consolidating entities, and to provide an example of a firm that has experienced trouble for failure to comply with the GAAP guidelines. Ethical Dilemmas in Partnerships Scenario 1: In the first scenario, there are two partners in an antique business, Mr. Right and Mr. Wrong. Mr. Right manages the store, and Mr. Wrong travels and purchases antiques to add to their store inventory. The each may borrow items from the inventory on occasion for one reason or another. While Mr. Right was out of town Mr Wrong’s daughter was married and had a desire for one of the inventory items valued at $5,000. So Mr. Wrong took the item from inventory and gave it to his daughter as a wedding gift. He recorded the item as a debit from the COGS for $5,000. The question is asked what are the ethical aspects of Mr. Wrong’s actions and how should he have recorded the transaction? To begin with, they are both wrong for allowing the other to take unpaid for inventory items from the store. It should be made clear in the partnership agreement that any inventory product removed from the store for any purpose...
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...Enron, Tyco International caught the public eye. One must first have an understanding of what it is to be ethical and moral. Once there is an understanding of these two terms, one may gain an appreciation of the occurrences in the corporate business world in the early 2000’s. One occurrence in particular is Tyco International. Tyco International will be evaluated. This evaluation will include the historical aspects, the corporate spending and the loans obtained, the outcome of events, and the punishments imposed. Further, the question of is it difficult to see ethical breaches that we may commit will be discussed. Ethics and morality are interconnected and thus integrity is also linked. According to Stephens, one cannot be defined without the other being in the definition. Stephens states many definitions of ethics have morals within the definition. One may differ with Stephens. While both ethics and morals relate to right and wrong, ethics is set rules of conduct that spells out how things are based on the rules for a specified group or action and morals are based on a person’s habits or principles and ideals as to their conduct. Integrity is a rigid adherence to a code of behavior. Ethics is society driven and is flexible to a point. Morals and integrity are internalized within self and are found to be fairly consistent unless a person changes their belief. Now with the understanding of ethics, morals, and integrity, we can focus on the history of Tyco International...
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...According to the Tyco website, Tyco originated as a Tyco Laboratories a United States government research laboratory company. Today Tyco has three independent companies: Tyco Healthcare, Tyco Electronics, and Tyco International consisting of five different business segments. Flow Control, Electrical and Metal products, Fire Protection Services, Safety Products, and ADT Worldwide are the five business segments under Tyco International’s umbrella. Tyco is a vertical structure with levels of hierarchy. The board members and top management are responsible for governing its’ mission and goals while ensuring the organization’s five principles are enforced. Tyco expects each employee to strive for excellence and work as a team. Tyco’s leadership team directs employees to be innovative, openly communicate, and continue to improve their skills. The company focuses on equality and fair treatment for employees. Management and staff are accountable for their actions and work performance. Tyco promotes safety in the workplace. Tyco protects each location by the companies anti-violence, drug and alcohol free workplace policy. Tyco promotes individual and corporate integrity, each person including leaders are to uphold the organization’s standards of integrity with each other, customers, and other stakeholders (Tyco, Peoples & Values, 2010). Vertical structure is the most common business structure; however, many organizations are restructuring their organizations. The restructuring makes...
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...A Matter of Ethics John Hilger Ashford University Personal and Organizational Ethics PHI 445 Stephen Carter February 07, 2014 A Matter of Ethics Business ethics is something that all companies and organizations need to be mindful of. It isn’t something that just the large and powerful for-profit organizations need to worry about, but it is something that not for-profit organizations have to be cautious as well. I plan to show how two large well known institutions failed to live up to these. Penn State is one of the more widely recognized leaders in higher education. It first came into existence in 1855, when the Commonwealth chartered it as one of the nation’s first colleges of agricultural science. And it’s goal was to apply scientific principles to farming. Penn State’s main campus is located in the small city of State College; State College is a quintessential college town with small eateries and quirky little shops that line the streets. There are a total of 24 locations of the campus throughout the Pennsylvania area. Penn State’s tax exempt status is the same as most not for profit state schools and the company is 501c3. Through my research I was unable to find out the date that it was granted or if there was an umbrella organization. According to Penn State’s Alumni Insider from their December 2009 Issue, there are 44,000 full-time and part-time employees at all of the locations. One of the biggest obstacles that any and all institutions of higher learning...
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...Part 1- Facts of the Case Prior to the Tyco scandal, the company was one of America's largest conglomerates, with operating revenues of 38 billion dollars and 240,000 employees, worldwide. Tyco Laboratories began operations in 1960, performing experimental work for the U.S. government. The firm went public in 1964 and quickly expanded, mostly by acquisition, to exploit the commercial applications of its work. Dennis Kozlowski joined the company in 1975 as an assistant controller. The company subsequently shifted its focus from growth to profits within its three primary divisions: fire protection, electronics, and packaging. Kozlowski joined Tyco's board in 1987 and became president and chief operating officer two years later. Kozlowski engineered a coup to become Tyco's chief executive officer (CEO) in 1992 and the chair of the board in 1993. He diversified the company, branching into health care. Tyco eventually became the second largest producer of medical devices in the United States. On December 5, 2001, the Tyco shares were trading for 59.76 on the NYSE. B. Identification of all individuals or firms who knew about, participated in, or condoned the behavior. The primary people that were identified for responsibility of the scandal were Dennis Kozlowski and finance chief, Mark Swartz. Kozlowski joined the company in 1975 as an assistant controller at Tyco. He worked in the company during a time of rapid expansion and moved to the board of directors in 1987, become CEO in...
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...The Traitorous Tyco Scandal: Sentencing of L. Dennis Kozlowski and Mark Swartz Business Law 447-A Written By: Lindsey Proffitt White collar crime is not a victimless crime, and affects many people. These crimes can devastate a company, force investors to lose billions of dollars, and destroy people’s life savings. Through L. Dennis Kozlowski’s and Mark Swartz’s scandal reported in 2002, the Tyco Company lost over $28 billion dollars in debt. However, the biggest lash came to its shareholders who lost over $90 billion. The Tyco two were tried and found guilty in 2005, and are currently serving a 25- year- sentence. Crime never pays and it is only a matter of time before one is caught. The damage done affects all people involved including the innocent families of the victims and criminals. These two may not have ruined the company, but they ruined themselves. The question is was it worth it? Partners in Crime: The Tyco Threesome When people think of criminals; they tend to stereotype this to involve thugs and the lower class. However, this is not always the case. Participants of the privileged society are also capable of criminal behavior, but usually in a more complex manner. One of the more popular high society crimes involves business scandals and is termed “white-collar.” These crimes stem from greedy business and government professionals who become financially motivated to commit a nonviolent work related crime that usually includes hoarding large amounts of money...
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