Tyco International Ltd. was started in the year 1960 by Arthur Rosen Burg. It is a company that deals with vital products and services. Its products are sold to over 60 countries around the world. Currently it is the leading company that provides electronic security products. It also deals with fire protection, valves, and controls.
Lack of Corporate Governance
The major cause of the fall of Tyco International was the lack of corporate governance. The Corporation executives were illegally rewarding themselves bonuses and cancelling loans they had taken from the Corporation. The two, Kozlowski and Swartz, also operated the company’s stock prices in the most unprofessional way. They hiked the prices and forged the real value of the stock prices. The two also took part in the fraud due to which they siphon over $600 million off the Tyco International. Kozlowski and Swartz denied access of the company’s documents to external auditors. They hired internal auditors who reported to the two top executives. These made it impossible for the investors to be informed about the true state of the company’s status. They also exercised perjury while working as the top executives of Tyco International. These acts in which Kozlowski and Swartz were engaged negatively affected the Corporation. The two were, however, later arrested and faced 23 federal securities laws violations. The Courts found that they had also violated the Corrupt Organization Act.
The corporate governance was abused in the corporation. Decisions were coming from all corners: no one was in charge of the company. The top executives formed no committee that would be responsible for the decision making regarding the crucial matters of the corporation. This made them have an easier way to misuse the corporation cash disbursement. Nobody could have questioned their illegal acts in the company. The duties and roles of the employees were not clearly defined and they were not allowed to question the moves and decisions of the top executives.
The employees took advantage of the failed corporate governance and also started engaging in unethical practices. The top executives did not offer direct guiding to the employees about what was expected of them. They were busy planning and scheming how to defraud the company. Thus, the employees did not receive ethics training that they would put into practice. No systems were made to enable the employees to know how to handle ethics violations. This allowed Kozlowski and Swartz to make up all accounting rules and regulation. They also did not take into account the rights of investors to receive information about the company. These acts led to losses of Tyco in 2000-2002: its earnings reduced drastically (Markham, 2006).
Organizational Structure Used by Dennis Kozlowski and Controls He Used
Dennis Kozlowski used different organizational structures for the implementation of his strategic plan. In 1980s there were only three segments of business: electronics, packaging, and fire protection. Later they were reorganized into four segments, which were Electrical and Electronic Components, Healthcare and Specialty Products. Kozlowski took advantage of these four segments and acquired a large market share in each. Thus, “during the tenure of Kozlowski more than 1,000 companies were acquired by Tyco” and “during the 1990s the acquisitions were made prudently and led to increase in profits of Tyco in spite of diversification” (Maras, 2011). The CFO of the company was reporting directly to Dennis Kozlowski. He informed him of loans he intended to get from the company. They both took the loans from the company and did not pay them back.
Role of Tyco Leadership in Strategic Implementation
Dennis Kozlowski was a key figure in the strategic implementation at Tyco International. He ensured that there was a significant growth of Tyco International through acquisitions. He acquired many companies, which saw the increase of profits. The plan, however, did not last long as this acquisition strategy failed and Tyco began making losses. At this point Kozlowski dropped the strategy.
Role of Strategic Entrepreneurship in Creating Firm Value at Tyco
The key role in the creation of Tyco value has been played by strategic entrepreneurship. Strategic entrepreneurship is considered to be a successful method that companies can use to gain wealth. During the tenure of Dennis Kozlowski, the company added profits from $ 300 million to $36 billion. The company not only discovered new business opportunities, but also became engaged in competitive advantages. These strategies were not long term but rather short term.
The Tyco International scandal remains one of the most renowned scandals in the World (Markman, 2006). Dennis Kozlowski and Mark Swartz, the two top executive officers of this corporation were found guilty of multiple crimes and were both sentenced to 25 years of imprisonment.