Arthur J. Rosenberg, in 1960, created the company called Tyco Incorporated. It was located in Waltham in Massachusetts. The company continued to grow and in 1982, it was divided into different divisions with a division each in charge of packaging, fire protection and electronics (The Law Teacher 2014). In the 1990’s, the company was shaken up again and new divisions created to take care of flow control, health care products, electronic components and fire and security services. Tyco also began acquiring other companies and by 2000 Tyco had taken over companies like the CIT Group, ADT and Raychem.
Dennis Kozlowski was appointed as CEO in 1992. He had previously held the positions of Chief Financial Officer, Company’s President and Executive. Kozlowski began an aggressive program to acquire and merge with other companies and was also known to pick only people close to him to serve on the board of Tyco Inc. (The Law Teacher 2014).
Because of the company’s growth, a stock split was instituted in 1999 and stories began to spread that Tyco was engaged in bad accounting practices and specifically that the company was “producing irregular financial accounts” an allegation that Tyco denied. Kozlowski, during his time as CEO, oversaw the mergers and acquisitions, which grew Tyco’s profits to beyond the $30 billion mark.
Due to persistent rumors, the Board of Directors of Tyco began investigations in 2002, revealing that Kozlowski had received $81 million in bonuses that were unauthorized, purchased art worth $14.725 million to install in his $30 million apartment located in New York City and had diverted company funds on many occasions (Mintz 2012). He also held a $2 million party in Sardinia, Italy for his wife’s 40th birthday and billed Tyco for $1 million. Dennis Kozlowski and Mark Schwartz who was the Chief Finance Officer (CFO) are said to have stolen $170 million from Tyco had irregularly and fraudulently sold $430 million worth of stock options (The Law Teacher 2014).
In 2002, the Manhattan District Attorney’s office, led by DA Robert Morgenthau (Neal 2013) indicted Dennis Kozlowski and was found guilty of grand larceny, securities fraud, falsifying business records and perpetrating fraud worth $134 million and was convicted in 2005 (Farnham 2013). He was jailed and was awarded parole after spending more than 8 years in prison and released on January 17, 2014. During an interview with Morley Safer on 60 Minutes, Kozlowski said that he was only doing what CEO’s that preceded him at Tyco had done and that he had not broken the rules (Mintz 2012).
Kozlowski’s actions are no different from those of the leaders of Goldman Sachs. A Senate panel tasked with investigating the financial crisis of 2008-2009 had discovered impropriety on the part of the company. However, the Justice Department released a statement said in a statement that “The department and investigative agencies ultimately concluded that the burden of proof to bring a criminal case could not be met based on the law and facts as they exist at this time…” (Mintz 2012) and would therefore not prosecute. These executives broke the same rules as Kozlowski and should have been prosecuted.
Ethical relativism, as a theory, holds that the norms of a person’s culture or situation determine ethics and morality and that morality is relative to these things (Velasquez, Andre, Shanks, Meyer 1992). In stating that he only acted the way he did because CEO’s before him had done the same, Kozlowski was suggesting that he was free to determine his own ethics in line with whatever situation he was faced with. Therefore, whatever prevailing facts there were; Kozlowski was asserting that what he did wasn’t wrong or unethical, given that other people before him had done the same.
Ethics are founded upon ideas and core values that should be followed irrespective of the situation. These values are immutable and include such things honesty and trustworthiness. Any person that acts in a manner that contravenes these values is wrong; irrespective of their circumstances, therefore Kozlowski was wrong to break the trust of his employers and to try to cover up the truth.
Kozlowski’s interests were also discordant with those of his employers and he put his own interests before those of the people that employed him in committing embezzlement, accounting fraud and cronyism in appointing his friends to the board (The Law Teacher 2014).
Kozlowski was wrong to break the trust of his employers and to steal from them and for that, he should have faced severe punishment and be used as an example to anyone else that would think of doing something similar.
Kozlowski faced the ethical dilemma of carrying out the work he had been hired to do with honesty against benefitting illegally from the same job, to put the interests of his employers first or to advance his own and failed. Kozlowski also failed as a leader because he did not set the right example for those who worked under him and if they knew their leader was stealing from the company, they too would have probably gone down the same path of embezzlement, fraud and misappropriation of company funds.
