Tyco International-Case Study - 919 Words

Case Summary: The case discusses the Tyco International corporate scandal that was realized in 2002 when the national television of the U.S. showed one of the most well-known chief executive officers, Dennis Kozlowski in handcuffs after being arrested for misappropriating the companys money and concealing information from the companys board of directors and shareholders. In 2004, the former CEO Dennis Kozlowski and former CFO Mark Swartz were accused of the theft of $170 million from Tyco Corporation. However, they argued that the board of directors approved it as compensation. In 2005, Kozlowski and Swartz were convicted and the verdicts carried potential jail terms between 8 to 25 years in state prison. Answers of Case Questions:†¦show more content†¦This lavish and luxurious lifestyle has led Tyco to lose hundred millions of dollars. 2. How did Dennis Kozlowski have the opportunity to steal $ 137 million in unauthorized bonuses? Kozlowski had the opportunity to steal $ 137 million because of; first, the organizational structure. Tycos corporate structure was highly decentralized, with many of its business units having their own financial statements, internal revenue targets, and incentive compensation systems. Senior financial management set aggressive EBIT targets for Tyco and its various business units. Under the incentive compensation systems in place at Tyco, the financial managers at a Tyco business unit could receive substantial bonuses for reporting financial results that met or exceeded their business units revenue target. With the encouragement and financial inducement of the companys senior management at the time, various Tyco business units and reporting levels used improper accounting practices in order to increase revenue. Second, Kozlowski restructured Tyco, after he was given the CEO position, by handpicking a few trusted individuals and placing them in key positions. Those handpicked individu als were aware of Kozlowski unethical business practices. Yet, no one dared to reveal the unethical issues that were taking place or he/she would be shot down by Kozlowski. Furthermore, theShow MoreRelatedCase Study: Tyco International: Leadership Crisis1647 Words   |  7 PagesCase Study: Tyco International: Leadership Crisis Case Study: Tyco International: Leadership Crisis Gupta Bhagirath, BUS604 Grand Canyon University Abstract Tyco International Ltd. NYSE: TYC is a highly diversified global manufacturing company incorporated in Switzerland, with United States operational headquarters in Princeton, New Jersey (Tyco International (US) Inc.). 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