Case Study on "Tyco International"

Case Study 4 pages (1229 words) Sources: 1+

[EXCERPT] . . . .

Tyco International - Case Study

Tyco International grew into a conglomerate under Kozlowski's ruling. The executive's goal was at all times to maximize profits, regardless of the means. As such, he was the mastermind behind numerous and dubious acquisitions and mergers. The CEO implemented unorthodox practices to purchase other companies and he also misused the corporation's funds. He used enormous sums of money to buy other companies, he eliminated all those that didn't register the desired profits and caused numerous job losses. Furthermore, the leadership policies implemented by Kozlowski proved poor transparency and the CEO repetitively removed those individuals that questioned his strategies. However, the corporate board at Tyco was extremely satisfied with the performances achieved by the chief executive officer that were quantified in the massive profit increases. Proof of their content was the CEO's continuously growing salary.

Aside from the legal issues of the case, Tyco's former CEO proved to be a man of questionable ethics. Following the example of mentor Joseph Graziano, Kozlowski indulged in personal eccentric spendings which he financed from the corporation's revenues. His actions were both illegal and imoral.

2.b) However the management board at Tyco was formed of several individuals who were supposedly solely actioning in the best interst of the share holders, rumour had it the board was not as innocent as they said. On September 2002, former CEO Dennis Kozlowski and former CFO Mark Swartz were arrested and accused of misusing $170 million of the corporate funds and also of having secretly and illegally sold company shares of $430 million. After their arrest, other fraudulent actions of the corporate board were revealed to the public.

As such, the board members were involved in loan-forgiveness programs; had invested millions of dollars in private stock funds; had received bribes of millions of dollars for arranging acquisitions; held controlling positions within other companies, which they financed from Tyco's funds; or had used the corporation's funds in their personal interest.

The scandal first broke out when the corporate board became aware of a $20 million payment made to board member Franck E. Walsh for his contribution in a previous merger (CIT). The discovery led to the resignation of Walsh and the further questioning of CEO Kozlowski. The following investigations revealed the existence of dubious transactions, fund misappropriation as company funds had been transferred into the CEO's personal bank accounts and tax evasion. On June the 2nd, 2002, Kozlowski resigned his position within the Tyco management board. Subsequently, CFO Mark Swartz resigned himself. On September of the same year, both former Tyco executives were charged with 38 felony accounts.

2.c) Once the scandal had broken out, the management board at Tyco pressured the executives facing criminal accusations to resign. Furthermore, the company filed lawsuits against several former board members, including Swartz and Kozlowski. The new CEO was appointed Edward Breen. The new executives had observed and criticized the business behavior of their predecessors and had sworn to not follow in their footsteps. The new restructured board decided to implement a transparent policy and to promote a more conservative accounting system.

The recent actions implemented by the new board are aimed to restore the population's confidence in Tyco. Currently, the strategies developed and the promises made are clearly insufficient to regain the lost trust; and the public's reticent response to the measures taken is understandable. The new board is charged with the difficult task of repairing the damage done by their predecessors, clearing the company's name and proving their worth.

2.d) Aside from a complete restructuring of the board and of the accounting systems used, Tyco has to implement other strategies to regain the trust of employees, investors, partners, clients and… READ MORE

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