BUS 5113

LEADERSHIP, POWER, AND ETHICAL BEHAVIOR

Written Assignment Unit 7

August 2021
BRIEF SUMMARY OF THE CORRUPTION CASE

Arthur Rosenburg founded Tyco International in 1960 as an investment holding firm specializing

in solid-state science and energy conversion (Daniels Fund Ethics Initiative, n.d.). Later, the

corporation changed its focus to the commercial sector and became a publicly traded company,

resulting in a flurry of quick acquisitions to broaden its business interests. The firm was divided

into three parts in the 1980s: Fire Protection, Electronics, and Packaging. Dennis Kozlowski

joined the firm in 1975, when Joseph Gaziano was the CEO. Gaziano was known for his

extravagant lifestyle, which impressed Kozlowski. In 1982, Gaziano died of cancer, and John

Fort took his position. John's administration was not as extravagant as that of his predecessor.

Fort promoted Kozlowski because of his work ethic, and he finally became president of Grinmell

Fire Protection Services. The company's leadership was cutthroat, and Kozlowski was a tough

person, purchasing competitors and cutting managers' pay. Fort ultimately stepped down as CEO

and Chair of the Board of Directors, but remained a member of the board, and Kozlowski took

over as CEO. Tyco's expansion was founded on acquisitions, according to Kozlowski.

Throughout his tenure, he appointed members of his close circle to crucial positions, including

Mark Swartz as CFO and others to the board of directors. He also hired Mark Belnick as Tyco's

general counsel. According to the Daniels Fund Ethics Initiative (n.d.), investigations revealed

that certain board members were complicit in Dennis Kozlowski's unethical actions. Lord

Michael Ashcroft, Richard Bodman, Frank Walsh, Stephen Foss, and Lord Michael Ashcroft

were all named as suspects. In 2002, Kozlowski and Swartz were charged with 38 charges of

stealing $170 million from Tyco and selling $430 million worth of stock options illegally. Since

then, Tyco has recruited Edward Breen as CEO, shareholders have elected a new board, and

Breen has launched an investigation into the company's accounting and corporate governance
procedures. As Vice President of Corporate Governance, Eric Pillmore set out to instill three

components into the Tyco culture: strong and ethical leadership, accountability, and a behavior

tracking methodology. Tyco has been able to recover from the corporate governance scandal and

remains a strong company.

WHY IS THIS A CASE OF ABUSE OF LEADERSHIP POWER, UNETHICAL

BEHAVIOR, AND CORRUPTION?

Because individuals in positions of authority generally have major obligations to the firm and

their employees, power and leadership frequently go hand in hand. However, misdirected or

misused power may disrupt the way a corporation operates (McQuerry, n.d.). Unethical conduct

is the polar opposite; it encompasses any actions that break the law, such as theft or violence,

purposeful breaches of corporate regulations, or the use of hard-sell sales tactics that may be

legal but take unfair advantage of human frailties (Duff, 2019). Giving or receiving bribes or

improper gifts, double-dealing, under-the-table deals, influencing elections, diverting funds,

laundering money, and scamming investors are all examples of corruption by individuals in

positions of authority (Chen, 2020).

We may reasonably state that the rot at Tyco International was well entrenched based on these

definitions. Dennis Kozlowski was a fearsome figure with a no-holds-barred managerial style; he

was rash in his purchases, despite opposition from inside the business, and he exploited his

unique position as CEO and chair of the board to operate Tyco as if it were his personal piggy

bank. Corporate governance appeared to be so poor that it would be accurate to state that it was

non-existent. Both Kozlowski and Swartz engaged in unethical activity by dealing in stock

options and carrying out some operations without the board's knowledge; it was comparable to

corruption, with some of the transactions overstating accounting records.

WHY ARE LEADERS HELD TO A HIGH MORAL STANDARD?

Individuals in positions of leadership in the for-profit, nonprofit, or governmental sectors should

be held to a higher ethical standard, according to Herring (2018). He goes on to say that while

leaders, like everyone else, have flaws and egos, these egos help them to reach greatness, but

they must be channeled for the benefit of others. Immoral leaders do not make judgments based

on ethics; instead, they prioritize their own self-interests.

The skill and demeanor of a business's executives are primarily judged; they represent the firm's

public face, and the way they operate a company says volumes. Leaders that demonstrate high

levels of ethical behavior and leadership produce a high degree of integrity, which leads to

trustworthiness and helps subordinates to embrace and follow the established visions.

WHAT CHANGES WERE PUT IN PLACE TO ADDRESS ETHICAL CONDUCT?

Shortly after Kozlowski's departure, Edward Breen took over as CEO, and shareholders voted for

a new board of directors, as well as a motion to make future executive severance measures

subject to shareholder endorsement (Daniels Fund Ethics Initiative, n.d.). The board chair was to

be a non-executive director, not the CEO. As stated previously, Eric Pillmore was appointed

Vice President of Corporate Governance in an effort to improve the company's ethical culture.

The Company Guide to Ethical Conduct was established after he implemented a corporate ethics

program and replaced 90% of the headquarter employees.

It was then translated into a number of languages and sent to all of the company's workers

worldwide. After that, an ombudsman role was created to resolve disputes between staff and

management. Tyco responded by establishing a confidential hotline where workers may report
misbehavior without fear of reprisal. Tyco also releases a quarterly report that includes staff

complaints.

References:

Chen, J. (2020, July 14). Corruption. Investopedia.Retrieved from:

https://www.investopedia.com/terms/c/corruption.asp

Daniels Fund Ethics Initiative. (n.d.). The University of New Mexico. Retrieved from:
https://danielsethics.mgt.unm.edu/

Duff, V. (2019, February 05). Examples of unethical behavior in the workplace, Chron.
Retrieved from: https://smallbusiness.chron.com/examples-unethical-behavior-workplace-
10092.html

Herring, H. (2018, January 16). Should leaders be held to a higher ethical standard? eJP.
Retrieved from: https://ejewishphilanthropy.com/should-leaders-be-held-to-a-higher-ethical-
standard/

McQuerrey, L. (n.d.). Adverse aspects of power in leadership. Chron. Retrieved from:

https://smallbusiness.chron.com/adverse-aspects-power-leadership-74301.html