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Tyco International Corporate Governance Case Solution & Answer

Tyco International Corporate Governance Case Solution

Executive Summary

The main purpose of this report is to analyze different corporate governance issues in the case, which Tyco had been facing. We have found that the company was facing a conflict of interest issue, transparency of financial reports, hiding of the assets, overwriting of the financial reports and other accountability issues. So in this report, we discussed the unethical practices which Kozlowski was involved in, and the main problem was their unity in exchange for the financial returns to each other.They were harming the company’s image because the company’s stocks price was increasing in an unusual manner, which landed trouble for the company and the company was investigated further along with its auditors.

Company Introduction

Tyco International started its operations in 1960 as a research laboratory. Tyco had growth throughout the time by acquisitions, as it acquired 16 companies by 1968. Initially, Tyco started four units ( Electronics, Healthcare, Fire security, and Engineered products or services), which continued till 2007.  Tyco possessed a diversified product and service line and had a significant market share. Dennis joined the Company when Joseph Gaziano was the CEO, he joined as an accountant and later on, he became the president of  Grinnell Fire Protection System.

Problems in Tyco

Tyco was facing the problem of unethical business practices, described below:

Unethical leadership

The person who was leading the company, was involved in unethical business activities within the organization. Dennis Kozlowski as CEO, was doing unethical activities, which were-raising suspicions against the company, and eventually the company ended up having legal issues and financial problems. He was the person who stole the company’s money. He was not only involved in illegal activities, but was also trying to get subordinates and lower-level employees involved, which led them to willingly ignore the unethical practices carried out by Kozlowski, without rasing any question.It was Kozlowski and his employees who made these scandals. Many organizational factors contributed to these scandals, which were organizational culture and leadership style.

Unethical problems of subordinates

Except forKozlowski,other peoples were involved in the unethical practices, whereas, people in the company were divided into two sides. Few employees were supporting Kozlowski and few were supporting the other higher grade, CFO Swarts. After the employees, the directors were also involved in the illegal activities, and they were covering it by supporting the illegal activities, to defend themselves. Kozlowski bought a mansion for her wife but no one from the board of directors informed her about this and kept silent. The Board of directors were also involved in such unethical practices as they were also getting financial benefits by doing so. Lower management employees were also quiet in return for financial benefits.

questionable auditing practices on Tyco’s business

Kozlowski was carrying out illegal activities in a way that the auditor of Price Water House Coopers (PWC) was unable to detect the illegal transactions and activities. Whereas, he was also suspected of not detecting these financial activities in the financial reports. Kozlowski continued his illegal practices because there were no rules and auditing firms were unable to identify these activities. It became very difficult for the company to control these issues……………………..

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