Tyco

Submitted By
Group 12
 1960
• Founded by Arthur J. Rosenberg
• Formed as an investment and holding company with two segments i.e Tyco
Semiconductors and The Materials Research Laboratory
• In the first two years of operation, the company focused primarily on governmental
research and military experiments in the private sector

1962
• The business was incorporated in Massachusetts and refocused on high-tech
Company materials science and energy conservation products

Overview 1964
• The company went public and began to fill gaps in its development and distribution
network by acquiring Mule Battery Products, first of Tyco’s 16 acquisitions in the next
four years

1970
• Consolidated sales and stockholder equity reached $34 million and $15 million,
respectively
• aggressive acquisition period
• By the end of the decade, Tyco had a larger and more diverse corporation with sales
topping $500 million and a net worth of nearly $140 million
1980
• Focused organizing its newly acquired subsidiaries
• Divided the company into three business segments (Fire Protection, Electronics, and Packaging)
• Acquisition continued and reorganized its subsidiaries into four segments: Electrical and Electronic Components, Healthcare
and Specialty Products, Fire and Security Services and Flow Control

1992
• Dennis Kozlowski became CEO of Tyco International
• again adopted an aggressive acquisition strategy (over 1000 other companies between 1991 and 2001)

1993
• The company’s name was changed from Tyco Laboratories, Inc. to Tyco International Ltd to ensure global presence

1996
• Added to the Standard & Poor's S&P 500 Composite Index

2002
• Incurred extensive losses
• Struck with two goodwill impairments i.e. their fiber-cable overcapacity issue and other corporate problems, costing the
electronics segment $250 million related to sales issues in Power Systems

• Midway through the fiscal 2002 year, Tyco became embroiled in a massive scandal involving the excesses by its former chairman and
CEO, L. Dennis Kozlowski, and his senior management team
• Kozlowski resigned
• Tyco filed federal suit against Mark H. Swartz, Tyco's former executive vice president and chief corporate counsel, and Frank E. Walsh, a
former director
 • CCTV/Access Control Equipment (Tyco Integrated Security, American
Dynamics, Kantech, Software House, CEM Systems)
• Circuit protection devices
• EAS (electronic article surveillance) & RFID (radio frequency identification)
products (Sensormatic)
• Engineering services
• Fire alarm systems (Simplex, Tyco Integrated Security)
• Fire sprinklers (SimplexGrinnell, Wormald)
Different Tyco • Fire-fighting hardware (Scott Safety) and Fire-fighting foam concentrates
(Ansul, Chemguard, Skum, Total Walther, and Sabo)
Businesses • GRINNELL Grooved Products
• Safety products (including industrial-site safety & personal protective
equipment (PPE) SCOTT Safety)
• Security systems (Tyco Integrated Security, ADT, DSC)
• Physical Security Information Management (Proximex)
• Valves and controls
• Pressure-relief valves for nuclear power generation
 1980s - CEO – John Franklin Fort
Under his leadership Tyco genuinely benefitted a lot from the M&A
1991 – He was succeed by Dennis Kozlowski
Under his leadership the company saw rapid expansion through
acquisitions

Board Level Happening in Tyco

 Action to formalize board room discussions and decision making process
About the started
 Plans to formulate policies for BOD, related to their tenure, compensation,
board performance evaluation, came up
 Board members failed to formulate policies for themselves, especially policies
related to performance evaluation
 Owing to lack of clarity of the mission and responsibilities board members did
not go for re election
 The board committee was then reconstituted, with necessary changes
April 26, 1990 June 7, 1990 September 19, September 26, March 2, 1992
1990 1990

Board of directors Board has decided Disagreement over Immediate need As new directors
given ultimate in adopting a CEO being the for 2 additional are added,
responsibility for formalized presiding officer at directors. procedure should
governing business meeting schedule the board meetings also be added for
the same

Objective of board CEO to preside Board terms are Need to focus on Performance
is to maximize over the meeting too long, and they executive evaluation of the
shareholder value of the board should be for a succession and board and
fixed amount of compensation individual directors
time are not done, but
they should be
done
Informal mode of Due to many new Main issue is that Need to Also, board should
operation of the acquisitions and the board is understand the annually asses the
board, challenges, board overpaid with cash flow situation CEO
management decides to be a bit respect to its duties at Tyco
reports oral, lack of attentive from the
formalization earlier casual
approach

Too much informal Board chairman Directors should

structure for a $5 and CEO should be have a fixed
billion company 2 different persons. tenure, instead of
The informality of serving indefinitely
board is getting
intolerable
April 21, 1992 August 21, 1992 November 2, 1992 August 30, 1993 January3, 1994

Confusion arising Board has not Directors are Board will be Board has no
out of lack of decided itself a role unwilling to adopt relatively useless in defined role, no
direction to any kind of self- the absence of a mission, no explicit
evaluating process commitment to benchmark
self-examination
and criticism

Needed new Board has not set a The committee Board will not Regular meeting of
standards and an mission for itself structure of board function if outside directors in
evaluation process and has no is in shambles personally executive sessions
for directors scheduled review attention is not at least twice a
paid year

Directors should Lack of leadership Board lacks

not be considered in the boardroom leadership to
as having a lifetime address the
job company’s
problem
  indication of the struggle for governance structure within a culture
of virtually limitless expansion.
 Informal mode of operation
 More focus on verbal communication
 Decided not to adopt formal model of operation : Board Decision
Things not  Board do not take the time carefully and thoroughly to review its
Right with the functioning and to conclude how best to discharge its
responsibilities
Board  The board does not evaluate its own performance and that of the
individual directors
  The Board of Directors has reviewed all of its responsibilities
 Procedures to assure that it is receiving sufficient information to fulfil its
obligations
 It includes formal review with written approval or disapproval of all
equity compensation plans
compensation programs
Changes other similar programs

Implemented  Ensure that the delegation, for any delegated responsibilities to

committees, fits within certain parameters
 Regularly reviews the performance of the committee or officer
 Review charitable contributions, compensation to officers, loans to
employees, and the use of corporate assets
 Prepare and approve detailed written charters for each of the
committees of the Board
  It is the duty of Board to exercise control over audits and reviews
 Boards members may not know about misconducts in the
organization, but they are responsible for having control systems and
accounting procedure capable of detecting it
 BOD, although not complicit in wrongdoing, but have been unaware
of what is occurring in the company
Case  Ignorance may be due to
Inferences  Lack of attention
 Lack of competence
 Lack on independence

Sneak peek to our ancient knowledge regarding ethical dilemma:

https://www.youtube.com/watch?v=UUUzxeqcfGA
Thank You!
Thank You!!!