Tyco International: Leadership Crisis
Leadership is defined as a process of motivating a group of people to achieve common goals (Ward, 2020). According to The Workplace Coach (2013), ethical leadership is crucial for leaders to establish an ethical organization. Ethical leaders are attentive to how their decision affects others. Therefore, they utilize their power to serve the people rather than their own self-interest (The Workplace Coach, 2013).
Brief Summary of The Corruption Case
Tyco International was founded by Arthur Rosenburg in 1660 as an investment company that focuses on solid-state science and energy conversion (Daniel Funds Ethics Institute, 2011). In 1980, the company was restructured and divided into three sections that are: Fire Protection, Electronics, and Packaging. In 1975, Dennis Kozlowski entered the company. Then in 1982, John Fort became the CEO of Tyco, he promoted Kozlowski to be the president of Grinmell Fire Protection Service due to his high work ethic.
During that time, Kozlowski appointed Mark Swartz as the CFO of Tyco. He also handpicking his circle and placing them in the key position of Tyco. In 2002, Kozlowski and Swartz were charged with 38 charges due to the corruption scandal. According to the investigation, Kozlowski and Swartz were allegedly stole $170 million and illegally trade $430 million of Tyco’s stocks (Daniel Funds Ethics Institute, 2011). According to the investigation, the suspects are not only Kozlowski and Swartz but also other members of the board of directors that are Lord Michael Ashcroft, Richard Bodman, Frank Walsh, and Stephen Foss.
Why is this a case of abuse of leadership power, unethical behavior, and corruption?
In pursuant to Daniel Funds Ethics Institute (2011), Kozlowski abused his leadership power by handpicking his own circle and placing them in the key position of Tyco. This allows him to assure the board directors to keep secretive about his unethical activities. Kozlowski also abused his power to remove Jeanne Terrile and David W who scrutinized Tyco’s money flow. As McQuerrey (n.d) stated, abuse of leadership power includes misdirected or misused authority that might obstruct the company’s operational activities.
According to Duff (2019), unethical behavior includes any action that violates the law such as theft, violence, and violation of company policies. In this case, Kozlowski Kozlowski used the company’s money for his extravagant lifestyle. Not only that, but he also bought $14 million artwork for tax evasion.
Corruption is illegal behavior that includes committing or receiving bribery, double-dealing, fraud, money laundering, and diverting organization funds (Chen, 2020). By stealing $170 million and illegally trade $430 million of Tyco’s stocks, Kozlowski’s case can be included as a corruption case.
As we can see here, Kozlowski’s actions match with the case of abuse of leadership power, unethical behavior, and corruption.
Why leaders are held to a high moral standard?
The Workplace Coach (2013) stated that leaders should show ethical leadership and have a high moral standard to establish a safe workplace that boosts employees’ integrity, accountability, and trust. By adopting a high standard of morals, leaders can prevent any legal consequences of their actions. This will improve employee performance and driving them to achieve the organization’s goals faster.
What changes were put in place to address ethical conduct?
As Edward Breen was promoted as CEO, and the new board of directors members are elected. The first program that Breen launched was the company’s accounting investigation and improving the corporate governance procedures. (Daniel Funds Ethics Institute, 2011). In addition, the Vice President, Eric Pillmore added three components into the Tyco corporate culture that are, strong and ethical leadership, accountability, and behavior tracking methodology. He replaced 90% of the Tyco HQ employees and create the “Company Guide to Ethical Conduct”. By doing so, Tyco has been capable to overcome the scandal and retrieve its old position as a strong company (Daniel Funds Ethics Institute, 2011).
Conclusion
Leaders must ensure the ethical practices are carried out in all aspects of the organization. By nurturing ethical leadership, leaders can create a strong foundation for their employees to improve their ethical beliefs, accountability, values, and ethical decision-making. As we see in the Tyco scandal case, unethical leadership can severely hurt the company culture. Therefore, leaders should recognize the impact of maintaining a high moral standard for all company operational activities.
References
Chen, J. (2020, July 13). Corruption. Investopedia. https://www.investopedia.com/terms/c/corruption.asp
Daniel Funds Ethics Institute. (2011). Tyco International: Leadership crisis. The University of Mississippi. https://danielsethics.mgt.unm.edu/pdf/Tyco%20Case.pdf
The Workplace Coach. (2013, March 6). The importance of ethical leadership. The Workplace Coach | Executive Coaching Atlanta. https://www.theworkplacecoach.com/the-importance-of-ethical-leadership/
Ward, S. (2020, September 17). What is leadership? The Balance Small Business. https://www.thebalancesmb.com/leadership-definition-2948275
Note:
This article is written based on University of The People Organizational Behavior (BUS 5113) written assignment by Fristy Tania in October 2021
