Tyco & the Price of Unethical Behavior

Unethical Perspectives: Tyco & the Price of Unethical Behavior

Prior to what has become known as the Tyco scandal, the company was among one of the largest conglomerates, with a market capitalization of more than $1 billion. The CEO of the company Dennis Kozlowski was thought of as one of the top 25 manager of the year, and had been included on a list of people to watch by Fortune Magazine because of his turn-around of the company’s sprinkler-system division at the beginning of his rise into management. In 2002, Kozlowski was charged with cheating on taxes related to $1 million of sales tax on his art purchases, and 38 felony counts for stealing $170 million directly from Tyco through forgiven loans not approved by the board, and an additional $430 million gained through the sale of stock. The Tyco stock price dropped from $60 a share to $7 a share because of the scandal. (Karabell, 2010)

There are mixed opinions on whether Dennis Kozlowski was rightfully depicted as a criminal who is guilty of embezzlement from Tyco, or just seen as many of the corporate leadership of large companies are as being too greedy, and has been made a scapegoat. Kozlowski strongly believes he just had “bad judgment, and was piggy”, and if that was the ground for incarceration, much of Wall Street should be right there with him in prison (Kaplan, 2009, p. 2).

Greed or Corporate Embezzlement

In the case of Tyco, the level of unethical activities that were undertaken by Kozlowski was extensive over the period of years that they occurred. The question of whether executive compensation is permissible and how much is appropriate is separate from the question of whether there was criminal activity by Kozlowski. Kozlowski in his defense of his actions ...

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... D.A. (2009). KOZ makes his case. Fortune, 160(11), 14-16.

Karabell, S. (2010). Turning around Tyco: How corporate governance saved the day. INSEAD Knowledge, Retrieved on April 26, 2014 from http://knowledge.insead.edu/csr/turning-around-tyco-how-corporate-governance-saved-the-day-1168

Moriarty, J. (2009). How much compensation can CEOs permissibly accept? Business Ethics Quarterly, 19(2), 235-250.

Schneider, P. J. (2013). The managerial power theory of executive compensation. Journal of Financial Services Professionals, 67(3), 17-22.

Stephens, W., Vance, C., & Pettegrew, L. (2012). Embracing ethics and morality. CPA Journal, 82(1), 16-21.

Symonds, W.C. (2002). Commentary: Tyco: How did they miss a scan so big? Bloomburg Businessweek, Retrieved on April 26, 2014 from http://www.businessweek.com/stories/2002-09-29/commentary-tyco-how-did-they-miss-a-scam-so-big