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Price Of Unethical Behavior Add in library

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Questions:

Prepare a paper in which you evaluate the Tyco International case study provided in Kaplan (2009)and Stephen et al. (2012). Be sure to address the following in your paper:

• Briefly summarize the historical scenario surrounding Tyco International.

• How do you think the spending and the loans were able to go on for so long?

• Evaluate the outcome of events.

• Was the punishment justified? Why or why not?

• Is it difficult for us to see ethical breaches that we ourselves commit?
 
 

Answers:

Introduction:

There are several ways to define ethics, which are linked with morality. Any organization’s code of ethics would be valuable. Organizational ethics embrace the moral principle to develop the ethical standards of employees, workers and top most managers.

This principle just moved beyond the accepted values to behave constantly in a moral way. It is not only just appearing to be moral, but acting morally.

As a natural fact, it is important that each corporation, firm and professional organizations must have ethical guidelines. AICPA, PCAOB (Public Company Accounting Oversight Board), IMA and the SEC, these all are having their own code of ethics, which are based upon moral principle. This code of moral principle need to be prompted widely, so that both the inside and outside stakeholders become aware to take permission on their actions being constituents of the organization. It is also necessary that the CEOs, directors or the other top managers should clearly state about the personal responsibility and their code of ethics to the all employers, clients, investors and vendors.

Summarization on the historical scenario surrounding Tyco International:

In 1960, Tyco Inc. was formed as a holding and investment company with the two segments: Tyco Semiconductors and the Materials Research laboratory.

In 1970 stock holders and sales equity reached $15million and $34 million respectively.

In 1980 Tyco management focused on the acquisition of subsidiaries. Tyco divided the company into three business segments.

Dennis Kozolowski became the CEO of the Tyco International and adaptation of aggressive acquisition strategy is made by the company again in 1990.

Tyco’s aggressive strategy continued till 2000 purchasing general surgical innovation. In The 2001, the fiscal year, Mallinckrodt Inc. is acquired by the Tyco

Complexity grew within Tyco’s subsidiaries, in January 2002 

 A scandal occurred due to the dishonesty of CEO (Dennis) on February 3, 2003. After removing the scandal, Tyco made international moves in 2003, within the company and formed its Adhesives and plastic business segments.

To enhance the consumer awareness and to revive the corporate image Tyco launched a global print-advertising campaign in June 2004.

In 2005 VSNL acquired Tyco Global Network from Tyco International for $130 million.

 Tyco’s revenue downfall caused about $17 billion by the end of the fiscal year 2006. Though there was a strong cash flow, decreased debt and growing revenue, Tyco and its board of director give approval to separate Tyco into three segments.

In June 2007, there was a corporate separation of Tyco which split the company into three independent companies: Covidien Ltd. (Tyco Healthcare), Tyco International (Tyco Engineered products, Fire and Security services) and TE Connectivity Ltd. (Tyco Electronics).

In the past years Dennis was considered as the highest paid and most celebrated CEOs. With a market cap of $1.5 billion, Dennis named a company as TYCO from backwater manufacturer into industrial conglomerate, which is worth more than $100 billion. He was lauded as one of the top 25 managers of the year.

In 2002, it was time when fall came. Dennis was accused by the Manhattan district attorney for the cheating of 1 million in sales tax on his art purchases. This led to a larger investigation made by DA and Tyco board on Dennis. With the following year Dennis was found to cheat his company over hundreds of millions of dollars, which includes unauthorized bonus also. Dennis was sentenced to prison for anindeterminate period of 8 to 25 years.

 

Reason behind the spending and loans were taken for so long:

 According to the Tyco Fraud Information center, there were accounting errors but there was no fraud problem. Tyco’s CEO, Dennis Koslowski was accused with other top managers of giving themselves loans with low interest or without interest, which are not approved by the Tyco board. Some of these loans were part of “key employee loan” program offered by the company. They were also accused of selling their stocks, without telling the investors. These are the reason behind to spend and to take loans were so easy for Dennis and other top managers for so long.

Evaluation of the outcome of the event:

As an outcome of this event, people, who have destroyed Bear Streams, Lehman or AIG, are now spending time with the Dennis behind the bar.

After being removed from the scandal, Tyco made international moves in 2003 within the company by forming its adhesives business segments. Other changes also took place in Tyco’s corporate governance (Stephens, Vance, and Pettegrew, 2015). Tyco’s board chose John Krol as the lead director. Tyco’s board adopted new governance principles and policies on delegation of authority, which in turn strengthened the control over the disbursements of cash within the company (Brown, 2005).

Then the final improvement took place on corporate governance, which has come under the guidance of the Ethical Conduct. The guidance was imposed to make the employees aware about the correct procedures and to give warning for unethical behavior and practices (Tyco to split into 3 separate companies, 2006).

Opinion over the justification of the punishment:

The punishment was not justified. Though, bail was not granted to Dennis due to not having access to the prosecutorial evidence. The New York governor has the power to give mercy and criminals are released on parole, in an indeterminate sentence a vast discretion is there, such as, based on good behavior Dennis could be released in a couple of years (Gardiner, 2006).

Still it is a fact that Tyco always remains strong as WorldCom and Enron, whose downfall is caused by its leaders. The Shareholders, workers get affected too (Clarke, 2011).

Our possibilities to see and to commit the ethical breaches:

A study by Touche and Deloitte in 2009 indicated that a large number of teenagers suffer from the contradiction on ethical readiness for workforce. There are 80% of teens, who appreciated their confidence for being prepared to take ethical decision in future; even they are able to accept their unethical behavior in present. There are only 25% of teens, who have admitted that they would be “very likely” to revel knowledge of unethical behavior in the work font (Dresser-Rand buys valve business from Tyco, 2007).

These are not only cases; in the case of the parents, they do not even want to accept the possibility that their children can do anything wrong (Johnson, 2012). Even when their children are fully admit their unethical act. Some teachers and the school administrators punish student for their classroom misdeeds (Kaplan, 2015). This situation may lead to leave the profession or taking the other way to make the students realized about their misdeeds. There are few cases, where no accountability for the misdeed, allows students to cheat them without the punishment and they started believing that cheating is an acceptable activity (Ferrara and LaMeau, 2012).

Conclusion:

Ethics says about the individual value system started developing while the education of a person reaches to the college and further education contribute a little to bring out the changes.

There are varieties of reason, to the people, who performs unethical acts. Kohlberg made classification on cognitive frameworks to divide ethical behavior into 6 categories, which are considered as a 6 levels of moral reasoning, they are- stage one indicates being ethical for fear of being punished. Stage two describes being ethical is out of concern. Stage three describes to be ethical for the peer pressure to do the same. Stage four says to ethical due to the rules, laws, regulations and standards, Stage five describes social responsibility for being ethical out of concern to do good for others. Lastly stage six describes the concern for the moral principle and knowing the correct thing to do.

 

References

Brown, M. (2005). Corporate integrity. New York: Cambridge University Press.

Dresser-Rand buys valve business from Tyco. (2007). World Pumps, 2007(489), p.6.

Ferrara, M. and LaMeau, M. (2012). Corporate disasters. Detroit: Gale, Cengage Learning.

Ferrell, O., Fraedrich, J. and Ferrell, L. (2010). Business ethics. Mason, Ohio: South-Western, Cengage learning.

Gardiner, S. (2006). A Perfect Moral Storm: Climate Change, Intergenerational Ethics and the Problem of Moral Corruption. Environmental Values, 15(3), pp.397-413.

Gavai, A. (2010). Business ethics. Mumbai [India]: Himalaya Pub. House.

Johnson, C. (2012). Organizational ethics. Thousand Oaks, Calif.: SAGE Publications.

Kaplan, D. (2015). KOZ MAKES HIS CASE. Fortune, 160(11), pp.14-16.

Stephens,, W., Vance,, C. and Pettegrew,, L. (2015). Embracing Ethics and Morality. The CPA Journal, 82(1).

Tyco to split into 3 separate companies. (2006). Pump Industry Analyst, 2006(1), p.16.

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