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Tyco: A Top-Down Aproach To Ethical Failure
Tyco: A Top-Down Aproach To Ethical Failure
APROACH TO ETHICAL
FAILURE
MADE BY:
PRABHNEET SINGH-17021021141
HIMANSHU GUPTA-17021021257
AYAAN ANAND-17021021044
PRANAV ARORA-17021021143
COMPANY HISTORY
Mark Swartz
He Started working in Tyco in the year 1991.
He previously worked for Deloitte.
He became the CFO in the year 1995.
Also nominated for the CFO excellence award in the year 2000.
TYCO UNDER DENNIS KOLZOWSKI
SEC launched the second investigation in early 2002 against CEO Dennis
Kozlowski and CFO Mark Swartz.
Tax Evasion.
Robert Morgenthau aka Sherlock Holmes.
Improper use of company funds.
Payoffs were paid to directors to cover up improper use of funds.
Undisclosed stock sales. $430 million made by Kozlowski and Swartz.
No Whistle Blower
CHARGES AND PUNISHMENT
Inflated operating income by $567 million.
Improper acquisition accounting by undervaluing acquired assets
and overvaluing acquired liabilities.
Used reserves to make adjustments and smoothen its publicly
reported results to meet earnings forecasts.
Failure in disclosure of executive compensation, indebtedness and
related party transactions of its former senior management in
annual reports.
TYCO was charged with $50 million civil penalty
CEO and CFO was charged for $240 million fine
CEO and CFO faced imprisonment for 25 and 8 years respectively
WHERE DID THE MONEY GO?
Unethical business
Unethical leadership practices of
subordinates
Unethical auditing
practices of TYCO
WHAT COULD’VE AVOIDED THE FRAUD
Employee training
Greater segregation
programmes could
of duties
have been adopted
REBUILDING
Company filed suit against CEO and CFO for more than $100 million. It fired a total of 9
executives on their board.
New management team recovered some of the funds taken by CEO and CFO hence restored
investors faith.
New board of directors voted to make future executive agreement and board chairman to be
an independent person rather than TYCO CEO.
Eric Pillmore was hired as VP of Corporate Governance
NEW CORPORATE GOVERNANCE
MODEL
Installation of corporate ethics programme and new ethical guide was distributed
to all employees.
90% of headquarters staff were replaced.
An Ombudsman position at Tyco who mediated between employees and
management.
Published confidential hotline „Concern LINE‟.
In 2004, CEO Edward Breen was listed as one of the Business weeks Best
Managers.
In 2008, Tyco was named Corporate Citizen of the year for helping the homeless
LEARNING/SUGGESTIONS