Tyco Ethics Paper
Introduction
In a time where every organization is looked at under a microscope the price of unethical behavior is expensive. Companies like World Com, Enron, AIG, Health South, and a host of other companies add to the growing list of entities involving unethical misconduct of some sort. This paper will point out the price a Tyco paid when his ethics were in question. In addition to the outcome of events surrounding Tyco and the punishment imposed on its CEO, ethical breaches are also prevalent in us.
Tyco Scenario Dennis Kozlowski, 63, is the former CEO of Tyco, who was accused and convicted of looting millions of dollars from Tyco. Tyco provides security products and services, fire protection and detection products and services, valves and controls, and other …show more content…
industrial products (Marketline, 2012, p. 12). According to Kaplan, (2009), Kozlowski was able to turn a faltering Tyco, during the time of his tenure, into a noteworthy conglomerate. Kozlowski transformed Tyco from a 1.5 billion dollar industry into a $100 billion dollar juggernaut. In route to building a successful corporation Kozlowski amassed a considerable amount of currency to the tune of nearly a half of billion dollars which also included a plethora of assets. He lived a very extravagant lifestyle. In his article Koz Makes His Case, Kaplan, (2009) stated that Kozlowski amassed nearly a half-billion dollars and reveled in the toys that came with it: a $31 million Fifth Avenue apartment, a vintage yacht, a Renoir, and a Monet. Kozlowski’s spending subsequently led to allegations of tax invasion and he was eventually tried and convicted of misrepresenting company funds. When business officials misrepresent or use company funds, usually by trying to cover them up and to suit their own needs is considered a white-collar crime. Marks, (2012) accessed that deception and cover-up are the hallmarks of white-collar crime (p. 32).
Lengthy Loans & Spending Kozlowski was able to frequently loan and spend money because the company was doing well. According to Kaplan, (2008) Kozlowski was to play fast and loose with his board of directors and Sweeney, (2002) also agreed that Tyco is had to defend itself against a former employee 's charges alleged that the company played fast and loose with generally accepted accounting principles (p. 22). Playing fast and loose gave Kozlowski the financial leverage he need to spend cash. Tyco was earning profits and dividends were being paid to stakeholders so there was no indication that any wrong doing was taking place and according to The Heat Stays on (2004), Tyco 's merger-driven model was one of the reasons why the stock price soared (p. 42). With a soaring stock price and accurate financial reporting it could be hard to think that a company is engaging in anything unethical or criminal. Lastly, Kozlowski split Tyco up into four different publically traded companies. The reason for the split up was to increase revenue and bring more money to shareholders. Splitting the company up into four components was another way Kozlowski could generate more cash rapidly because he did not have to focus on just one entity. Hsieh, Lyandres, and Zhdanov, (2011), states that an Initial Public Offering enhances a firm’s value, reduces valuation uncertainty, and contributes to an efficient acquisition strategy (p. 1367).
Outcome of Events Kozlowski was sentenced to 8 to 25 years in a New York State Penitentiary and the question remains if Kozlowski’s conviction was just, or he deserves leniency. In a time where other companies such as Worldcom, AIG, and Lehman Brothers all succumbed to corruption and allegations of financial wrongdoings that lead to the economic downturn of 2008, makes Kozlowski’s alleged wrongdoing appear to be a grain of sand of a very big beach. Kaplan, (2009), states that along the actions with WorldCom 's Bernie Ebbers, and Jeffrey Skilling, who are also serving long sentences, Kozlowski now looks like a small fry in the sea of financial shenanigans (para, 3). It was not just the jail time that Kozlowski received. Tyco also contributed to a growing body of companies that ethics could be questioned. Enron, WorldCom, Tyco, HealthSouth, and Adelphia had common cultural components that put an organization at risk of ethical collapse (Jennings, 2003, p. 49). As a result of some of these financial discretions the Sarbanes–Oxley Act was introduced in 2002 to curtail and prevent companies from engaging in scandalous acts.
Justification of Punishment Kozlowski’s punishment of 8 to 25 years in prison is harsh in relation to the nature of the crime. The crime is considered to be a white-collar crime. White collar crime is non-violent in nature. Because Kozlowski reported all of the things he purchased and was not trying to hide or deceive anyone he should have not received any time in prison. Kaplan (2009) indicated that eight to 25 comes off as “gratuitous-personal payback” for a white-collar crime (para. 5). Based on the fact that Kozlowski did not intend to defraud, mislead, or hide any of the assets he acquired proves that his prison sentence was too harsh. The punishment was not justified. There are a list of CEO’s who ran companies into the ground financially and did not receive as much time as Kozlowski. “Go Directly to Jail: White Collar Sentencing After Sarbanes - Oxley Act” (2009) asserts that 15 executives of Health South Corporation, a major insurance company, nearly bankrupt the company in 2005, by perpetrating $400 million dollars in fraud and only received prison terms ranging from five months, probation, home detention, and fines (p. 1734). Recently, in United States v. Davis, the Court of Appeals for the Sixth Circuit vacated a sentence of one day in prison imposed on a defendant convicted of two counts of bank fraud where the recommended guideline range was thirty to thirty-seven months (Ford, 2008, p. 385). Ford, (2008) also wrote that some appellate courts have vacated over "vigorous dissent,” some white collar crime cases because some of the sentences were unreasonable (p. 385). The crime does not fit the punishment and did not warrant an eight to 25 year sentencing.
Ethical Breaches in Ourselves It is not difficult to see breaches in ourselves mainly because we are rational thinkers. We know the difference between right and wrong but the decisions we make could be impacted by what is in front of us and could alter our decision. For example, if the workplace has rule that prohibits using the companies emailing system for personal use and we violate that rule we are guilty of an ethical breach. Stephen, Vance, & Pettigrew, (2012), assert that people perform unethical acts for a variety of reasons (p. 19). Jennings (2003) indicated that personal benefits hanging in the balance can cloud judgment (p. 51). There are times when people, places, or things could cloud our judgment and we may become confused on what we have to do. We know that taking items home from the office is an ethical breach but we still engage in the act. We are perfectly aware of what we are doing. Some of the ethical breaches that exist within us stems from our up brining. If we are taught ethics from our parent’s and family members at a young age then we might practice the principle of ethic we learned as we grow older. Since we are conscious of the difference between what we perceive as right and what we perceive as wrong we are fully aware of the ethical breaches that exist within us.
Conclusion
Moving forward the price of ethical behavior will be expensive. Companies will have to work within the confines of ethics and continue to do what is right even when earning profits. There is no room for complacency and the price alone should compel corporate leaders in the right direction. We are rational thinkers and we are taught right from wrong at early stages in our lives. It is up to us as individuals to keep those same value, morals, and principles as we get older.
References
Corporate Governance: The Heat Stays On.
(2004). Financial Executive, 20(4), 36-43.
Ford, M. A. (2008). White-collar crime, Social harm, and punishment: A critique and modification of the Six Circuit ruling in United States v. Davis. St. John 's Law Review, 82(1), 383-399.
Go directly to jail: White collar sentencing after Sarbanes - Oxley Act. (2009). Harvard Law Review, 122(6), 1728-1749. https://web-a-ebscohost- com.libdatab.strayer.edu/ehost/pdfviewer/pdfviewer?vid=8&sid=eb2fbd34-f07a-4506- 9ae8-cc24d1af8516%40sessionmgr4001&hid=4212.
Hsieh, J., Lyandres, E., & Zhdanov, A. (2011). A theory of merger-driven IPOs. Journal Of Financial & Quantitative Analysis, 46(5), 1367-1405. doi:10.1017/S0022109011000421
Jennings, M. M. (2003). The critical role of ethics. Internal Auditor, 60(6), 46-51.
Kaplan, D. A. (2009). Koz makes his case. Fortune, 160(11), 14-16.
Marks, J. T. (2012). A Matter of Ethics: Understanding the mind of a white-collar criminal. Financial Executive, 28(9), 31-34.
Stephens, W., Vance, C., & Pettegrew, L. (2012). Embracing ethics and morality. CPA Journal, 82(1), 16-21.
Sweeney, P. (2002). The Travails of Tyco. Financial Executive, 18(4),
20-22.
Tyco International Ltd. SWOT Analysis. (2012). Tyco International, Ltd. SWOT Analysis, 1-7.
In a time where every organization is looked at under a microscope the price of unethical behavior is expensive. Companies like World Com, Enron, AIG, Health South, and a host of other companies add to the growing list of entities involving unethical misconduct of some sort. This paper will point out the price a Tyco paid when his ethics were in question. In addition to the outcome of events surrounding Tyco and the punishment imposed on its CEO, ethical breaches are also prevalent in us.
Tyco Scenario Dennis Kozlowski, 63, is the former CEO of Tyco, who was accused and convicted of looting millions of dollars from Tyco. Tyco provides security products and services, fire protection and detection products and services, valves and controls, and other …show more content…
industrial products (Marketline, 2012, p. 12). According to Kaplan, (2009), Kozlowski was able to turn a faltering Tyco, during the time of his tenure, into a noteworthy conglomerate. Kozlowski transformed Tyco from a 1.5 billion dollar industry into a $100 billion dollar juggernaut. In route to building a successful corporation Kozlowski amassed a considerable amount of currency to the tune of nearly a half of billion dollars which also included a plethora of assets. He lived a very extravagant lifestyle. In his article Koz Makes His Case, Kaplan, (2009) stated that Kozlowski amassed nearly a half-billion dollars and reveled in the toys that came with it: a $31 million Fifth Avenue apartment, a vintage yacht, a Renoir, and a Monet. Kozlowski’s spending subsequently led to allegations of tax invasion and he was eventually tried and convicted of misrepresenting company funds. When business officials misrepresent or use company funds, usually by trying to cover them up and to suit their own needs is considered a white-collar crime. Marks, (2012) accessed that deception and cover-up are the hallmarks of white-collar crime (p. 32).
Lengthy Loans & Spending Kozlowski was able to frequently loan and spend money because the company was doing well. According to Kaplan, (2008) Kozlowski was to play fast and loose with his board of directors and Sweeney, (2002) also agreed that Tyco is had to defend itself against a former employee 's charges alleged that the company played fast and loose with generally accepted accounting principles (p. 22). Playing fast and loose gave Kozlowski the financial leverage he need to spend cash. Tyco was earning profits and dividends were being paid to stakeholders so there was no indication that any wrong doing was taking place and according to The Heat Stays on (2004), Tyco 's merger-driven model was one of the reasons why the stock price soared (p. 42). With a soaring stock price and accurate financial reporting it could be hard to think that a company is engaging in anything unethical or criminal. Lastly, Kozlowski split Tyco up into four different publically traded companies. The reason for the split up was to increase revenue and bring more money to shareholders. Splitting the company up into four components was another way Kozlowski could generate more cash rapidly because he did not have to focus on just one entity. Hsieh, Lyandres, and Zhdanov, (2011), states that an Initial Public Offering enhances a firm’s value, reduces valuation uncertainty, and contributes to an efficient acquisition strategy (p. 1367).
Outcome of Events Kozlowski was sentenced to 8 to 25 years in a New York State Penitentiary and the question remains if Kozlowski’s conviction was just, or he deserves leniency. In a time where other companies such as Worldcom, AIG, and Lehman Brothers all succumbed to corruption and allegations of financial wrongdoings that lead to the economic downturn of 2008, makes Kozlowski’s alleged wrongdoing appear to be a grain of sand of a very big beach. Kaplan, (2009), states that along the actions with WorldCom 's Bernie Ebbers, and Jeffrey Skilling, who are also serving long sentences, Kozlowski now looks like a small fry in the sea of financial shenanigans (para, 3). It was not just the jail time that Kozlowski received. Tyco also contributed to a growing body of companies that ethics could be questioned. Enron, WorldCom, Tyco, HealthSouth, and Adelphia had common cultural components that put an organization at risk of ethical collapse (Jennings, 2003, p. 49). As a result of some of these financial discretions the Sarbanes–Oxley Act was introduced in 2002 to curtail and prevent companies from engaging in scandalous acts.
Justification of Punishment Kozlowski’s punishment of 8 to 25 years in prison is harsh in relation to the nature of the crime. The crime is considered to be a white-collar crime. White collar crime is non-violent in nature. Because Kozlowski reported all of the things he purchased and was not trying to hide or deceive anyone he should have not received any time in prison. Kaplan (2009) indicated that eight to 25 comes off as “gratuitous-personal payback” for a white-collar crime (para. 5). Based on the fact that Kozlowski did not intend to defraud, mislead, or hide any of the assets he acquired proves that his prison sentence was too harsh. The punishment was not justified. There are a list of CEO’s who ran companies into the ground financially and did not receive as much time as Kozlowski. “Go Directly to Jail: White Collar Sentencing After Sarbanes - Oxley Act” (2009) asserts that 15 executives of Health South Corporation, a major insurance company, nearly bankrupt the company in 2005, by perpetrating $400 million dollars in fraud and only received prison terms ranging from five months, probation, home detention, and fines (p. 1734). Recently, in United States v. Davis, the Court of Appeals for the Sixth Circuit vacated a sentence of one day in prison imposed on a defendant convicted of two counts of bank fraud where the recommended guideline range was thirty to thirty-seven months (Ford, 2008, p. 385). Ford, (2008) also wrote that some appellate courts have vacated over "vigorous dissent,” some white collar crime cases because some of the sentences were unreasonable (p. 385). The crime does not fit the punishment and did not warrant an eight to 25 year sentencing.
Ethical Breaches in Ourselves It is not difficult to see breaches in ourselves mainly because we are rational thinkers. We know the difference between right and wrong but the decisions we make could be impacted by what is in front of us and could alter our decision. For example, if the workplace has rule that prohibits using the companies emailing system for personal use and we violate that rule we are guilty of an ethical breach. Stephen, Vance, & Pettigrew, (2012), assert that people perform unethical acts for a variety of reasons (p. 19). Jennings (2003) indicated that personal benefits hanging in the balance can cloud judgment (p. 51). There are times when people, places, or things could cloud our judgment and we may become confused on what we have to do. We know that taking items home from the office is an ethical breach but we still engage in the act. We are perfectly aware of what we are doing. Some of the ethical breaches that exist within us stems from our up brining. If we are taught ethics from our parent’s and family members at a young age then we might practice the principle of ethic we learned as we grow older. Since we are conscious of the difference between what we perceive as right and what we perceive as wrong we are fully aware of the ethical breaches that exist within us.
Conclusion
Moving forward the price of ethical behavior will be expensive. Companies will have to work within the confines of ethics and continue to do what is right even when earning profits. There is no room for complacency and the price alone should compel corporate leaders in the right direction. We are rational thinkers and we are taught right from wrong at early stages in our lives. It is up to us as individuals to keep those same value, morals, and principles as we get older.
References
Corporate Governance: The Heat Stays On.
(2004). Financial Executive, 20(4), 36-43.
Ford, M. A. (2008). White-collar crime, Social harm, and punishment: A critique and modification of the Six Circuit ruling in United States v. Davis. St. John 's Law Review, 82(1), 383-399.
Go directly to jail: White collar sentencing after Sarbanes - Oxley Act. (2009). Harvard Law Review, 122(6), 1728-1749. https://web-a-ebscohost- com.libdatab.strayer.edu/ehost/pdfviewer/pdfviewer?vid=8&sid=eb2fbd34-f07a-4506- 9ae8-cc24d1af8516%40sessionmgr4001&hid=4212.
Hsieh, J., Lyandres, E., & Zhdanov, A. (2011). A theory of merger-driven IPOs. Journal Of Financial & Quantitative Analysis, 46(5), 1367-1405. doi:10.1017/S0022109011000421
Jennings, M. M. (2003). The critical role of ethics. Internal Auditor, 60(6), 46-51.
Kaplan, D. A. (2009). Koz makes his case. Fortune, 160(11), 14-16.
Marks, J. T. (2012). A Matter of Ethics: Understanding the mind of a white-collar criminal. Financial Executive, 28(9), 31-34.
Stephens, W., Vance, C., & Pettegrew, L. (2012). Embracing ethics and morality. CPA Journal, 82(1), 16-21.
Sweeney, P. (2002). The Travails of Tyco. Financial Executive, 18(4),
20-22.
Tyco International Ltd. SWOT Analysis. (2012). Tyco International, Ltd. SWOT Analysis, 1-7.