Evaluate the Price of Unethical Behavior

Introduction

Societal mores form a crucial aspect of human existence. They make a critical distinction between the human race and other animals. While other members of the animal kingdom exist in an amoral world that knows neither ethical nor moral standards, the human race is not as lucky or unlucky. In addition to conforming to societal norms, human beings are expected to observe the regulations that guide their professional endeavors to avoid the unpleasant consequences that come with defying them. Sometimes, these consequences are commensurate with the unbecoming conduct they serve to punish. However, in other cases, the institutions that have been created to uphold high ethical standards in the society serve as tools for vicious antagonism among individuals. This essay is an evaluative discourse on Kozlowski’s incarceration. Although it is permissible to justify this case, whichever way someone prefers, the critical question keeps recurring every time the case is deliberated upon is whether justice was served by subjecting Kozlowski to an indefinite jail term of between eight and twenty-five years.

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Build-up to the Tyco International Case

A brief recap of Tyco’s history can pave the way for a better understanding of the events that led up to the case. Tyco opened its doors to the public as an investment holding company in 1960 (Boostrom, 2011). It adopted a growth-through-acquisition strategy that enabled it to acquire over thirty major companies by the start of the new millennium. Over this forty-year period, Tyco was presided over by four different leaders beginning with its founder Arthur J. Rosenberg (Boostrom, 2011). Of special interest among these leaders is Joseph Gaziano, who was in charge of the company when Kozlowski joined the its workforce in 1975. According to Boostrom (2011), Gaziano had a lavish demeanor that intrigued Kozlowski, who embraced him as a friend and mentor. His demise abruptly ended his tenure forcing Kozlowski to adjust to the new leadership of John F. Fort III, who took over (Boostrom, 2011). Nonetheless, Kozlowski’s hard work and expertise soon elicited the attention of the new leader too.

Consequently, he was elevated to the helm of Grinnell Fire Protection Systems Company, which was Tyco’s largest division at the time (Boostrom, 2011). Kozlowski adopted an aggressive acquisition led growth model that quickly placed him at loggerheads with Fort, forcing the board of directors to arbitrate between the two (Boostrom, 2011). Kozlowski emerged triumphant because his aggressive methods earned Tyco lucrative returns. Fort resigned as company CEO in 1992 paving the way for Kozlowski to ascend to the helm of Tyco International. As the CEO, he transformed Tyco from a $1.5 billion company into an empire with a market cap of over $100 billion within a span of one decade (Kaplan, 2009). He adopted a lavish lifestyle that mimicked his former mentor Gaziano.

When the Manhattan district attorney pressed tax evasion charges against Kozlowski in 2002, Tyco launched an extensive investigation to evaluate his conduct (Boostrom, 2011). As a result, he resigned as the CEO of Tyco and was later found guilty of several counts of felony (Kaplan, 2009). After a controversial trial, he was sentenced to an indefinite jail term of between eight and twenty five years.

The Reasons behind the Protracted Unethical Conduct

A look at the Kozlowski’s activities shows that it took long before his fraudulent behavior was punished, yet it was not hidden from some people. In a bid to find out why the events surrounding his incarceration transpired as they did, the following issues emerged. Firstly, Tyco’s corporate structure ensured that the choice of what would happen and what would not was Kozlowski’s prerogative. Boostrom (2011) adds that Tyco’s decentralized corporate structure ensured that hardly anyone besides Kozlowski had an explicit understanding of the company’s activities. He was responsible for reporting to the board of directors, while the heads of the four unrelated divisions were subjected to him. This arrangement allowed Kozlowski to choose what to report to the board of directors and what to conceal.

Secondly, Kozlowski had an irresistible aura of charisma that enabled him to maneuver his way around everyone. Boostrom (2011) observes that a careful consideration of his stint at Tyco clearly attests to this assertion. When he went to work for the company in 1975, he became a friend to the then CEO Gaziano. In the wake of Gaziano’s demise, it took only a while for Fort to notice Kozlowski. Fort’s interest in him facilitated his rise to the helm of the Grinnell division of Tyco. In his new position, his aggressive demeanor placed him on conflict path with Fort, but he used his charisma to win the board of directors to his side. The full potential of his charismatic style of leadership manifested when he took over the leadership of Tyco as the CEO. He gave the investors attractive returns and rallied the entire Tyco fraternity behind him. No one cared to look into his conduct until the Manhattan district attorney blew the whistle.

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Thirdly, the deterioration in the ethical and moral fabric of society provided a haven for Kozlowski’s activities. He evaded taxes worth $1 million, siphoned $170 from the organization, and fraudulently engaged in the sale of company stocks worth $430 million (Boostrom, 2011). He also propagated underhand deals in which he compensated handpicked members of the company board with huge sums of money in return for various favors. For instance, he secretly gave Frank E. Walsh $20 million for facilitating the acquisition of CIT Group (Boostrom, 2011). His chief financial officer, Mark Swartz, with whom he was charged was perfectly aware of Kozlowski’s activities, but did not raise a red flag because was also a beneficiary of the activities (Boostrom, 2011). Similarly, Mr. Scalzo, the PwC auditor who examined the accounts of Tyco opted to remain quiet even after detecting that there were some questionable financial activities (Piano player accounting, 2003). The only rational reason for their decision to remain silent is that they were unable to uphold the ethical and moral standards expected of them.

Finally, Kozlowski’s underhand techniques were also a contributing factor. He victimized anyone who attempted to raise any concern about the operations of Tyco. A case in point is Jeanne Terrile, a Merrill Lynch analyst, who was moved from her position after a meeting between her boss and Kozlowski (Boostrom, 2011). She had expressed concern over the company’s possible future performance due to the haphazard manner in which it made its acquisitions. Therefore, even if someone was concerned about the course of events at Tyco, it was not easy to voice such concerns.

Evaluation of the Outcomes of the Tyco Case

The Tyco case officially began when the New York State Bank Department discovered that huge sums of money were being moved back and forth from Tyco’s accounts to Kozlowski’s personal accounts (Boostrom, 2011). The district attorney soon established that Kozlowski had evaded import taxes amounting to $1 million (Kaplan, 2009). This damning discovery instigated several other investigations into Kozlowski’s activities with shocking revelations.

Firstly, Frank E. Walsh, the member of the board of directors, was accused in receiving $20 million from Kozlowski for playing a pivotal role in the acquisition of CIT Group (Boostrom, 2011). This discovery was both disappointing and beneficial to the board of directors. The breach of trust was disappointing, but they discovered that they had lost huge sums of money through spending abuses. This incident supports the argument by Stephens, Vance & Pettegrew (2012) that most people purport to behave ethically only for purposes of avoiding problems with the law.

Secondly, it became apparent that Kozlowski and Swartz had conspired to defraud the company of up to $430 million and stole $170 million (Boostrom, 2011). The charges for which Kozlowski was found guilty earned him a sentence of between eight and twenty-five years in prison. Critics have contended that the sentence was too harsh because similar cases only attracted a two-year jail term elsewhere (Kaplan, 2009). However, going by the impunity with which Kozlowski carried out the activities, such a sentence is befitting.

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Finally, the incarceration of Kozlowski had far reaching repercussions for his accomplices. Most of them faced punitive measures in accordance with the law. As a result, the organization was purged of such people to enable it to start on a clean slate. In this sense, the organization benefited from the fiasco because it did not lose any money. All the money that had been misappropriated was returned. Further, the Tyco leadership is currently fostering a strong ethical and moral culture (Boostrom, 2011). Essentially, Tyco International benefited from Kozlowski’s misdemeanors.

Despite these apparent benefits, Kozlowski’s punishment was a clear reminder to the society that ethical and moral standards need to be upheld because they are right. It was fully justified because according to Abraham & Michie (2008), negative outcomes discourage unbecoming conduct. Such a sentence is considered a deterrent measure as it can discourage similar behavior due to the fear of similar consequences (Sargent, 2002). Further, the impunity with which Kozlowski conducted his unlawful endeavors warranted a harsh punishment to make it plain that such behavior was undesirable.

Although it is arguable that it is difficult to see one’s own ethical flaws, this argument is not applicable to Kozlowski’s case. If he had lacked someone to inform him that some of his activities were not in the best interest of Tyco, probably such an argument would be permissible. However, Kozlowski deliberately hunted down his critics and tried to silence them (Boostrom, 2011). This behavior shows that he did not appreciate criticism despite knowing that it existed. Additionally, Kozlowski consciously devised tricks aimed at avoiding tax payment (Kaplan, 2009). Based on these actions, Kozlowski cannot claim that he was unaware of his ethical and moral breaches because he was conscious of what he was doing.

Conclusion

In conclusion, the Tyco case serves as a good example that provides a number of lessons for managers and board members who choose to deviate from ethical norms. Kozlowski attempted to strike a balance between his personal interests and organizational goals, but typically, his endeavors were doomed to fail since the two cannot go hand in hand with each other (Umphress, Bingham & Mitchell, 2010). The public received the news of his jail term with ambivalence, but that did not exempt him from serving it. For Kozlowski, the hour of reckoning had come, and he had to bear the consequences of his misdemeanors.

References

Abraham, C., & Michie, S. (2008). A Taxonomy of behavior change techniques used in interventions. Health Psychology, 27(3), 379-387.

Boostrom, R. (2011). Tyco international: Leadership crisis. Albuquerque, NM: University of New Mexico.

Kaplan, D. A. (2009). Koz makes his case. Fortune, 160(11), 14-16.

Piano player accounting. (2003). Wall Street Journal. Web.

Sargent, M. A. (2002). The bottom line: The limits of corporate regulation. Commonweal, 129(15), 9. Web.

Stephens, W., Vance, C. A., & Pettegrew, L. (2012). Embracing ethics and morality: An analytic essay for the accounting profession. The CPA Journal, 82, 16-21.

Umphress, E. E., Bingham, J. B., & Mitchell, M. S. (2010). Unethical behavior in the name of the company: The moderating effect of organizational identification and positive reciprocity beliefs on unethical pro-organizational behavior. Journal of Applied Psychology, 95(4), 769-780.

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