Case Study Analysis
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Case Study 26 Tyco International Paper
Strategic Business Management and Planning MGT/488
July 11, 2011
Tyco International: A Case of Corporate Malfeasance
Describe how the lack of corporate governance at Tyco contributed to its downfall
Lack of corporate governance at Tyco led to its downfall. The top executives, Kozlowski and Swartz were accused of giving themselves $150 million in illegal bonuses and forgiving loans to themselves. The two were accused of jacking up the company stock prices. The executives were accused of perjury, fraud, it is alleged that the executives pilfered around $600 million from the company. Corporate governance fell dramatically when both the executives faced 23 violations of federal securities laws. Tyco and former executives were charged with the violation of the New Jersey Racketeer Influenced and Corrupt Organization Act.
There was no particular person who was given charge of corporate governance. There was no committee that looked into corporate governance principles, nor was there a good policy in place that would lead to control over cash disbursements. There were no direct instructions to employees to avoid unethical practices nor was there any system for reporting ethics violations. No ethics training was provided to executives or employees. Instructions to executives requiring them to comply with accounting standards or protection of investor rights were missing.
Further, in Tyco there was no statement that clarified the role and responsibility of Directors. The internal auditors did not report to the board but to the CFO who in turn reported to the CEO. These weaknesses in corporate governance led to Kozlowski and other executives to indulgence, and siphoning of money. Tyco's money was misappropriated by Kozlowski and was used for conspicuous consumption. The amounts that were taken away by Kozlowski and Swartz ran into hundreds of millions.
Shareholder investment was being squandered by the company....
Case Study 26 Tyco International Paper
Strategic Business Management and Planning MGT/488
July 11, 2011
Tyco International: A Case of Corporate Malfeasance
Describe how the lack of corporate governance at Tyco contributed to its downfall
Lack of corporate governance at Tyco led to its downfall. The top executives, Kozlowski and Swartz were accused of giving themselves $150 million in illegal bonuses and forgiving loans to themselves. The two were accused of jacking up the company stock prices. The executives were accused of perjury, fraud, it is alleged that the executives pilfered around $600 million from the company. Corporate governance fell dramatically when both the executives faced 23 violations of federal securities laws. Tyco and former executives were charged with the violation of the New Jersey Racketeer Influenced and Corrupt Organization Act.
There was no particular person who was given charge of corporate governance. There was no committee that looked into corporate governance principles, nor was there a good policy in place that would lead to control over cash disbursements. There were no direct instructions to employees to avoid unethical practices nor was there any system for reporting ethics violations. No ethics training was provided to executives or employees. Instructions to executives requiring them to comply with accounting standards or protection of investor rights were missing.
Further, in Tyco there was no statement that clarified the role and responsibility of Directors. The internal auditors did not report to the board but to the CFO who in turn reported to the CEO. These weaknesses in corporate governance led to Kozlowski and other executives to indulgence, and siphoning of money. Tyco's money was misappropriated by Kozlowski and was used for conspicuous consumption. The amounts that were taken away by Kozlowski and Swartz ran into hundreds of millions.
Shareholder investment was being squandered by the company....