The Management Failure of Tyco International
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The Management Failure of Tyco International
Tyco International was founded by Edward Breen in 1960 (Wikipedia, 2007). According to Wikipedia, (2007), Tyco International’s operational headquarters is located in Princeton, New Jersey, and employs 247,900 employees. Dennis Kozlowski became the CEO in 1992, leading with aggressiveness acquiring several other companies into the organization (Wikipedia, 2007). In 1999, after a stock split, rumors began to spread about Tyco’s accounting habits. It was said that Tyco was producing irregular financial accounts, but was denied by Tyco’s leaders. Throughout the years of Kozlowski’s leadership, Tyco merged and bought out several companies, making their profits grow beyond 30 billion dollars, but doubled its long term debt by over 10 billion dollars (Wikipedia, 2007).
In the event of trying to pull things back together, Kozlowski caused the company more harm. According to Kay, (2002), “The American-based conglomerate Tyco International Ltd. is in deep crisis following a wave of revelations concerning the corrupt practices of the company and its top management.” As things worsened, Kozlowski resigned while the stock was plummeting. A bankruptcy for Tyco International would mean that 240,000 employees would be out of work, which would have sent shockwaves through the economy (Kay, 2002). Acquisitions and financial manipulations lead to huge profits for Tyco over a long period of time.
Tyco faced bankruptcy because of failed tricks by its accounting department and fraudulent activity by the company’s leaders. Kozlowski was accused of applying millions of dollars to his personal life. His greed and misguidance cost the company billions of dollars, him his freedom, and money in court that was unnecessary. Management has the most important job in a company because the success is dependant upon their actions. An untrusting CEO like Kozlowski made shareholders indignant.
Kozlowski’s management plan was to turn Tyco International into a large incorporated company like GE. Only his plan came with his own benefits as well. No one can ever say what drove Kozlowski to commit such heinous crimes and put so many people’s jobs in harms way. By studying his actions, someone can see that it is easy for a rich person to be corrupted in the eye of money also.
Kozlowski broke federal laws (tax aviation) and state laws during his time as CEO for Tyco. He fraudulently transported money to New Hampshire to avoid paying taxes, stilling money to purchase his apartment, and getting loans through the company. Kozlowski pled not guilty to the charges in 2002 and a trial was scheduled for June 26th of the same year. He paid a 3 million dollar bond to regain his freedom until the trial.
Kozlowski showed little ethical concern with how his actions would affect the company, or any of the people involved with the company. According to what has been written in regards to his criminal history with Tyco International, Kozlowski had to have made his actions a part of his plan from the beginning. When he began his reign in 1992 as the CEO of Tyco International, he began his deceit through aggressively merging smaller companies and buying out others. The deceit took place when the financial paper trail was doctored to claim the funds as asset instead of spent monies.
Kozlowski’s actions were not only damaging illegally and ethically; his social responsibility was damaged too. Being that it is a company’s social responsibility to do the right thing for the society; the society was not taken into regard. A bankruptcy for Tyco International would have meant the depletion of jobs for over 240,000 people. That is not to mention the shareholders who counted on him to be honest in the financial reports. Not all of the 27 years of Kozlowski’s reign as CEO for Tyco International was corrupt. He managed bravely and enterprisingly the first few years of his time there (Business Week, 2002). Managers have to be aware of legal, ethical, and socially responsible planning. By implementing a plan in regards to these characteristics, a manager can avoid future failure.
After the company’s fall, they had to rebuild with a strategic plan. A person of interest in the rebuilding of the trust in Tyco was Michael Useem, a sociologist who interviewed Kozlowski during his greater days before the fall of Tyco (Business Week, 2002). In the same article, Business Week, (2002) said, “Under Kozlowski, he says, Tycos culture discouraged subordinates from questioning top executives and discouraged contact between directors and second-tier managers.” This was the