THE DECISION MAKING PROCESS ETHICAL LEADERSHIP, INDIVIDUAL FACTORS, ORGANIZATIONAL FACTORS CASE STUDY: TYCO INTERNATIONAL SCANDALLEADERSHIP CRISIS GROUP 1 MMBM ANG. 20 Daisy Rahmawati Esther Tiara Alexandra Rama Luhur Islamy Raman Anggorodi Sudarsono all of which will drive Tyco s long-term growth. Growth Focus on strategies to achieve organic growth targets and deploy cash for growth and value creation. wants and preferences and provide greater value to our customers than our competition. . Operational Excellence Implement best-in-class operating practices and leverage company-wide opportunities and best practices. value and success. earnings per share. driving operational excellence. Financial Strength & Flexibility Ensure that revenue. compliance and accountability. leveraging our diverse brands. Tyco Goals: What We Seek to Achieve Governance Adhere to the highest standards of corporate governance by establishing processes and practices that promote and ensure integrity. Teamwork and Culture Build on the company s reputation and image internally and externally while driving initiatives to ensure Tyco remains an employer of choice. and committing to the highest standards of business practices . Tyco Corporate Profile Vision & Goals Tyco Vision: Why We Exist and the Essence of Our Business To be our customers first choice in every market we serve by exceeding commitments.CHAPTER 1 INTRODUCTION A. providing new technology solutions. cash and return on invested capital objectives are met. Customers Fully understand and exceed our customers needs. who opened a research laboratory to conduct experimental work for the U.S. manufacturers and distributors of industrial/construction products 1988 Allied Tube and Conduit. manufacturers of water and gas flow control products y y y y . Tyco Inc. Inc.2001: Growth through Acquisitions In 1974. 1965 Mule Battery Products becomes Tyco's first acquisition. changes its name to Tyco Laboratories. The business was incorporated as Tyco Laboratories in 1962. Over the next three decades. and its focus turned to high-tech materials science and energy conversion products for the commercial sector. In 1964. 1962 Materials Research Laboratory and Tyco Semiconductor merge. Massachusetts with two primary holdings: Tyco Semiconductor and the Materials Research Laboratory. 1973 . Rosenburg. the company went public. Tyco's thrust changed to manufacturing industrial products. manufacturers of undersea fiber optic telecommunications cable 1976 Grinnell Fire Protection Systems. 1960 Tyco. Ph. fire sprinkler systems manufacturer and contractor 1986 Grinnell Corporation. Tyco begins to look for acquisitions to develop product. including: y 1974 Simplex Technologies. Much of this growth is achieved through acquisitions.Tyco History Tyco International was founded in 1960 by Arthur J. Tyco becomes a much bigger and more diverse company with annual revenues of more than $500 million and a net worth of nearly $140 million. steel pipe and related tubular products manufacturer 1989 Mueller Company. government research contracts to commercial applications of its work. government. Tyco's stock is listed on the New York Stock Exchange.D. is formed as an investment and holding company in Waltham. As a result. manufacturing and marketing capabilities.S. The business focused on applications in the fields of solid-state science and energy conversion. The business turns its focus from U. and in 1965 it began to acquire other companies to fill gaps in its development and distribution network. 1964 Tyco becomes a publicly owned company. a leader in the design. a leading provider of electronic security systems Keystone. tubing for the fire protection and fence markets. manufacturers of metal framing products and services y 1996 o o Watts Waterworks Businesses. industrial. actuators and accessories y 1998 Wells Fargo Alarm. providers of electronic security services. and CCTV and access control 1999 o y o o Raychem. flexible conduit. a manufacturer of steel pipe. producer of steel tubing. fire detection and monitoring. manufacturer and distributor of highperformance electronic products for OEM businesses and a broad range of specialized applications Glynwed. Acquisition makes Tyco the largest fire alarm company in the world Scott Technologies. and distributes a complete line of fire sprinklers. gas detection instruments and fire-fighting products for fire-fighting. EntAlarmingmguard. the world's leading retail security firm. manufacturers of valves. PVC pipe and fittings y 2000 AFC Cable. hydrants. valves and accessories. Acquisition enables Tyco to offer a complete security package to retailers around the globe Simplex Time Recorder. steel electrical conduit and similar products Central Sprinkler. manufacturers of pipe and tubular products Unistrut.. wastewater treatment and power generation markets Sempell. and Holmes Protection Group. manufactures. manufacture and supply of pre-wired armor cable. a leading designer and manufacturer of industrial valves. a leading designer and manufacturer of high-performance respiratory protection systems. a manufacturing and servicer of specialty valves used in industrial and power generation application y 1997 o o o American Pipe & Tube. and fittings used primarily in water utility. modular wiring systems and electrical fittings 2001 o o o o y SecurityLink and Southern California Edison fire and security services Sensormatic. a leading international designer. aviation and government customers . which designs. manufacturers. and steel studs/tresses for the residential and commercial construction markets ADT. including intrusion.y 1991 Wormald International Ltd. contractors and suppliers of fire protection systems and products 1995 o o y Tectron Tube. to strengthen the technology portfolio offered to retailers through its Sensormatic business Tyco International proposes change in place of incorporation from Bermuda to Switzerland 2009 y y Tyco Board of Directors unanimously approves moving the company s place of incorporation from Bermuda to Switzerland Tyco's flow control business acquires Hiter Industria e Comercio de Controle Termo-Hidraulico Ltda (Hiter). a leading privately held Brazilian valve manufacturer. 2008 y y y y y y y Infrastructure Services business sold to AECOM technology Corporation Nippon Dry-Chemical Co. Ltd. part of its ongoing commitment to develop EHS excellence and best practices across the company.2005 y y Plastics. Adhesives and Ludlow Coated Products businesses sold to an affiliate of the private investment firm Apollo Management. Safety Products. ADT acquires FirstService Security to strengthen the systems integration capability in its electronic security platform. Ltd. 2010 y y y y y Tyco announces a definitive agreement to acquire Brink's Home Security Holdings. Fire Protection Services.P.Tyco Electronics and Tyco International. a leading provider of radio frequency identification technology. Tyco publishes its first annual Environment.. 2006 Tyco Board of Directors approves a plan to separate the company s portfolio of businesses into three separate. publicly traded companies: Tyco Healthcare (now known as Covidien). Health and Safety (EHS) report. the last major Sensormatic® franchise Tyco acquires Vue Technology. sold to a subsidiary of Japan-based investment bank Daiwa Securities SMBC Co. The new Tyco International is composed of five business segments: ADT Worldwide. now operating as Broadview Security Tyco announces intention to spin off its electrical and metal products business Tyco completes acquisition of Broadview Security Tyco announces definitive agreement to divest European Waterworks business Tyco completes sale of European Waterworks business . Tyco acquires Sensormatic Security Corporation. Flow Control and Electrical & Metal Products.. and takes full ownership of an existing joint venture with Valvulas Crosby Industria e Comercio Ltda. Ancon Building Products business sold to to CRH plc. 2007 Tyco completes its separation into three independent companies on June 29. L. Inc. . install and service Tyco products: ADT Worldwide As the world s largest electronic security provider. chemical. suppression and special-hazard solutions to customers in 43 countries. Those products range from electronic security and alarm monitoring to fire-fighting equipment and breathing apparatus. and from water purification and flow control solutions to galvanized steel tubes and armored wire and cable. which design. industrial and governmental customers.4 million residential. power. Tyco Electrical & Metal Products. Fire Protection Services As a global leader in fire and life safety. and thermal control solutions for vital industries. Tyco Flow Control Tyco Flow Control is a leading global manufacturer and marketer of valves and controls. sprinkler. food and beverage. manufactures and sells products across three key business platforms: electronic security. life safety and fire suppression. Following is a snapshot of these segments. water and environmental systems. Tyco Safety Products. metal clad cable.y Tyco announces agreement to to sell majority interest in its electrical and metal products business to private equity firm Clayton. is a highly diversified global company that provides thousands of products and services vitally important to residential and commercial customers. Fire Protection Services provides fire detection. as well as building components. metal framing and cable tray systems. Tyco is composed of five business segments: ADT Worldwide. Tyco Electrical & Metal Products Tyco Electrical and Metal Products is an industry leader in the manufacture of glavanized steel tubing and pipe. Tyco Safety Products Tyco Safety Products designs. including energy. Tyco Flow Control. Dubilier & Rice Tyco Products Tyco International Ltd. commercial. ADT helps to protect more than 7. mining. Fire Protection Services. and construction. sell. water. Tyco Worldwide Tyco International Ltd. 12. 2002: Morgenthau announces a criminal indictment accusing Kozlowski and Swartz of enterprise corruption for allegedly stealing more than $170 million from Tyco and obtaining $430 million by fraud in the sale of company shares. and that another $10 million went to a charity where he was a director. publicly traded companies. Former Tyco corporate counsel Mark Belnick is charged separately with falsifying records to conceal more than $14 million in company loans. 2001: Tyco shares close at a high of $59. Jan. operates in all 50 U. 22. a commercial finance company. states and over 60 countries around the world. Timeline Of The Tyco Scandal Key dates and events that led to the convictions of former Tyco CEO L. Dennis Kozlowski and CFO Mark Swartz: March 13. Jan.76 on the New York Stock Exchange.S. June 4. 2002: Business Week magazine lists Tyco CEO L. 2002: Tyco shares drop sharply. Dennis Kozlowski as one of the top 25 corporate managers of 2001. Jan. Dec. Tyco offers the products and services the modern world needs to grow. 2001: Tyco announces $9. Dec. 29. 5. B. 2002: Former Tyco board member Frank Walsh pleads guilty in an alleged scheme to hide the $20 million in fees for the CIT Group deal. The announcement starts a slide in the price of Tyco shares. 2002: Kozlowski resigns unexpectedly as The New York Times reports he is the subject of a sales tax evasion investigation by Manhattan District Attorney Robert Morgenthau's office. constructed. Sept. 2002: Morgenthau announces a criminal indictment accusing Kozlowski of conspiring to evade more than $1 million in state and city sales tax on fine art purchases. Critical infrastructure components in many countries and municipalities have been designed.2 billion cash and stock deal to purchase the CIT Group. one day after the company filed a proxy report with the Securities and Exchange Commission disclosing that Walsh got a $10 million fee on the CIT Group deal. 17. Jan. 14. Tyco director Frank Walsh helps arrange the deal. 2002: The New York Times reports that Kozlowski and Tyco CFO Mark Swartz sold more than $100 million of their Tyco stock the previous fiscal year despite public statements that they rarely sold their stock. 30. Kozlowski and Swartz say they will buy 1 million shares with their own money. . June 3. and are even managed by Tyco companies. 2002: Kozlowski announces plans to split Tyco into four independent. 25. had previously appeared to make an "O. 26. former Tyco corporate counsel Mark Belnick is acquitted of charges that he received millions in loans from the company and failed to disclose the payments. who did not testify at his first trial. 2004: A mistrial is declared after a juror says she received a letter pressuring her to convict Kozlowski and Swartz. June 17. Defense lawyers call them honest executives who deserved and disclosed all corporate payments and perks. 7." sign to defense lawyers. July 15. 2004: In a separate trial. . 2005: The second trial of Kozlowski and Swartz begins with opening statements in which prosecutors switch tactics to focus on money the two allegedly stole from Tyco. 28. takes the stand and testifies that the millions of dollars in Tyco payments and perks he received had been properly authorized and disclosed. Tyco paid roughly half the $2 million cost of the event. April 27.000 shower curtain or the Sardinia birthday party for his wife. April 2. Some observers said the juror. 2005: A Manhattan jury finds Kozlowski and Swartz guilty of stealing more than $150 million from Tyco.K. They do not mention Kozlowski's $6. 2003: The first trial of Kozlowski and Swartz begins with opening statements in which prosecutors characterize them as crime bosses who looted Tyco. 2003: The jury is shown a video of a birthday party Kozlowski threw for his wife at a resort in Sardinia. Jan. They each could face 25 years in prison.000 shower curtain and other lavish furnishings that decorated Kozlowski's Tyco-owned apartment in Manhattan. 2003: Prosecutors show the jury a video of the $6. 2005: Kozlowski. Oct. She subsequently denied making any gesture toward the defense team. Ruth Jordan.Oct. Nov. which featured entertainers clad in togas and an appearance by singer Jimmy Buffett. and luxury homes). Board of Directors use company assets to enrich themselves not the shareholders corruption. ETHICAL ISSUES IN THIS CASE The ethical and legal issues at Tyco International range from accounting fraud. Below we provide the details of ethical issues occurred in Tyco International during Leo Dennis Kozlowski leadership. Mark Swartz Tyco s former CFO and Mark Belnick the o y company s legal counsel had taken over $170 million in loans from Tyco without receiving appropriate approval from Tyco s compensation committee and notifying shareholders. o o Tax evasion conducted by Kozlowski to increase company profit. they placed great emphasis on placing their own values ahead of what was good for the organization.CHAPTER 2 ETHICAL ISSUES A. . Taking $242 million from a program which was intended to help Tyco employees buy company stock so that Kozlowski could buy things for personal usage (yachts. Dennis Kozlowski opened an unpublicized Manhattan office overlooking central park and lavished it with every imaginable perks and use Tyco fund to purchase and furnish apartment for key executive and employees in New York s pricey Upper East Side. Dennis Kozlowski threw a toga party for his wife s birthday party that cost $2 million dollars. its initial intention was to increase reported Earning above what they would have been if more conservative accounting had been employed. Belnick was charged with larceny and trying to steer a federal investigation. never ask advice from stakeholders. and grand larceny. 2002. and the members of his team and also with the third party for example with CIT. Many of them were offset as bonuses without open approval. Board of Directors tend to make decision by their own perspective. Although still according to General Accounting Acceptance Principles. and Merrill Lynch. In addition. Kozlowski and Swartz also sold seven and a half million shares of Tyco stock for $430 million without informing the investors. Tyco engaged in an aggressive accounting implementation. insider trading. collusion and nepotism: Dennis Kozlowski. fine arts. The strategy planning of the executives were to focus on personal gain than on the best interests of the company and its shareholders. Tyco former CEO . Formal charges were made by the SEC September 12. The issues involved cohesion on the part of the CEO. For the most part these loans were taken with low to no interest. as well as taking more than $26 million from Tyco. therefore. did not bring the issues to the other members of the board. an analyst for Tyco at Merrill Lynch who was not so impressed with Kozlowski s activities and Tyco s performance. Stephen W Foss.5 million in Tyco funds to purchase a home. CEO of a textile concern. some of the board members were not aware of the fraud. CFO and legal counsel. The leaders didn t commit to Tyco Corporate Culture. In some cases. Granting $106 millions to various employees through loan forgiveness and relocation programs. 1. pleaded guilty and agreed to repay the $20 million plus an additional $2 million in court costs Walsh also held controlling interest in two firms that received more than $3. No transparency in sharing information to the stakeholders. FACTORS THAT CAUSED THE ETHICAL ISSUES We find that there are some factors that caused the ethical issues in Tyco International. and Legal Counsel) Richard S Bodman. The biggest contributor is Leadership Crisis.101 for supplying a Cessna Citation aircraft and pilot services. and some board members) who didn t have integrity. a former board member who received a $20 million bonus for the CIT merger. Mark Belnick: The CEO. were not honest and transparent with the stakeholders concerning the issues relating to the accounting fraud and conflicts of interest. and the relationships that had been established over time. Leader : Unethical leader (CEO. The board members that were aware. they were just as guilty of unethical behaviors as the CEO and his direct reports. received $751. Jerry Boggess the president of Tyco Fire and Security Division was fired and accused of creating numbers of bookkeeping issues that had a negative impact on earnings to shareholders. They all engaged in an enterprise of corruption and collusion. They steal the company assets to enrich personal assets. Falsifying documents in this loan program in the amount of $14 millions o Conflict interest issues for other board members (exclude CEO. used $2. . and other unethical deals that were going on behind the scenes. a venture capitalist. could not be the role model for the employees. The reason this could have transpired is probably due to the majority of board members being on the board >10 years.o Conspiracy between Kozlowski. CFO. CFO. Walsh. This shows with the substitution of Jeanne Terrile. invested $5 million for Kozlowski in a private stock fund managed by Bodman. Mark Swartz and former Legal Counsel.5 million for leasing an aircraft and providing pilot services to Tyco between 1996 and 2002. due to the nature of their positions. Lord Ashcroft. B. 2. There was also little transparency in the organization system. Tyco's corporate culture was driven by the CEO. maintain a 14 year growth within the business units. 4. which helped Tyco. He viewed himself as the organizations. and other flow control devices (23%). Kozlowski forced the acquired company. electrical and electronic components (13%). 2. to scale back sharply and eliminate anything and anyone that did not produce revenue. The company was organized into four distinct divisions fire protection (53%). and packaging material (11%). was removed from PWC after signing off on Tyco s 2002 audit. Merrill Lynch to become unethical while making recommendation for investor regarding the Tyco Performance and activities. which then Kozlowski will report to the board. colusion the Board members). conducted business as such. an analyst for Tyco at Merrill Lynch was removed due to her degrading analysis regarding the true activities and performance of Tyco International. Each division s president reported directly to Kozlowski. including members of the board of directors have a true picture of the firm s activities and finances. Joseph Gaziano.In fact. Employees & family Many employees were terminated during the company acquisition. PARTIES CONCERNED REGARDING THE ISSUES 1. has the power to manipulate financial reports and other important documents before it is reported to the board. Organizational Structure: The design of the organization itself. Dennis Kozlowski who admired the extravagant and lavish lifestyle lavish of the former CEO. was a decentralized organization. Kozlowski. Shareholder The scandal clearly harmed shareholder s benefit. The company assets is used to enrich (corruption. No financial report transparency provided by Tyco International. He took an assertive approach to acquisitions and mergers. therefore. Jeanne Terrile. Underwriter company Tyco made the underwriter Company. . The system caused only few people. There was little interaction among them. 3. C. Auditor Company Richard Scalzo. valve pipes. CHAPTER 3 THEORY & ANALYSIS A. organization. Framework for Understanding Ethical Decision Making in Business Ethical Issue Intensity Individual Factors Organizational Factors Business Ethics Evaluations and Intentions Ethical or Unethical Behavior Opportunity The first step in ethical decision making is to recognize that an ethical issue requires an individual. legal system. work group and/or organization to choose among several actions that various stakeholders inside or outside the firm will ultimately evaluate as right or wrong. Also. family. and profession and that the level of importance of each of these influences will vary depending on how the decision maker perceives the issue to be. described as the person s perception of social . The figure below outlines on what factors are usually involved and how the process flows until an ethical decision is made. or work group. perceptions. ETHICAL DECISION MAKING PROCESS AND ETHICAL LEADERSHIP An ethical decision making process can be encountered in any situation. A business ethical decision making process involves several factors. either in a family environment. special characteristics of the situation and the personal pressures endured at the particular place and time. the individual s moral intensity of the situation. Research suggests that there are six spheres of influence when confronted with ethical choices-the workplace. Ethical sensitivity is personal to the person depending upon the values. beliefs. religion. Ethical issue can be described as the ethical sensitivity of the individual or workgroup that faces the ethical decision-making process. we will focus mainly on ethical decision making process in a work group or business environment. community. In this discussion. needs. Monitor and assess using appropriate methods 10. Maintain commitment from top managers 3. Revise and reform to ensure continuous improvement . post. Ensure consistent implementation 8. Managers can affect the degree to which employees perceive the importance of an ethical issue through positive and/or negative incentives (reward/punishment). Provide timely training to reinforce knowledge 6. will increase the individual s perceptiveness regarding ethical problems. Therefore. Communicate ethical standards through multiple channels 5. The following diagram explains the steps on how a leader should implement an ethical program in the workplace. Ethical issue awareness regarding specific problem areas and how the firm wants specific ethical issues need to be handled needs to be raised by managers to their employees. however. Then the question would be what would be the change agent that would enable an ethical friendly business environment? This is where the role of a leader plays a critical role. and fairly 9. which in turn reduces his or her intention to act unethically. organizations with their culture and corporate governance combined with available opportunity will have its own influence and role. The Role of Leadership in Developing an Ethics Program 1. Respond and enforce consistently. Publish. Provide confidential resources to whom employees can go for advice or to report their concerns 7. it has a significant impact on ethical decision making because leaders have the power to motivate others and enforce the organizations rules and policies. Specially if these employees have diverse values and backgrounds to increase their ability in making ethical decisions. an ethical decision making in an organization will not strictly depend upon the individual s values and moral behavior. and make codes of ethics available and understandable 4.pressure and the harm the decision would have on others. promptly. Conduct a rigorous self-assessment of the firm s values and its existing ethics and compliance program 2. Because these perceived importance will have a profound effect on the employee s ethical judgement and behavioral intention. The Role of Leadership in Corporate Culture Leadership is the ability or authority to guide and direct others toward achievement of a goal. Leaders are key to influencing an organization s corporate culture and ethical posture. Transactional leaders create employee satisfaction through negotiating. Authoritative Leader Inspires employees to follow a vision. Democratic Leader Relies on participation and teamwork to reach collaborative decisions. 1. 2. a University of Georgia business professor. facilitates change. there are Seven Habits of Strong Ethical Leaders that needs to be portrayed in a strong ethical leader: 1. 5. 5. Pace Setting Leader Sets high standards and works best for attaining quick results from highly motivated individuals who value achievement and take the initiative. or bartering for desired behaviors or level of performance. 2. and their needs and relies on friendship and trust to promote flexibility. 4.Leadership Styles Leadership Styles influences Ethical decisions. Coaching Develop skills to foster long-term success. 6. 3. 6. Another way to consider leadership style is to classify them as transactional or transformational. innovation. Coercive Leader Demands instantaneous obedience and focuses on achievement. 7. Six Leadership Styles that are based on emotional intelligence had been identified by Daniel Goleman are as follows. and is skillful in issuing challenging assignments. 4. initiative and self control. Habits of Strong Ethical Leaders Based on the adaptation of Archie Carroll s 7 Habits of Highly Moral Leaders . their emotions. delegates responsibility. 3. Ethical leaders have strong personal character Ethical leaders have a passion to do right Ethical leaders are proactive Ethical leaders consider stakeholders interests Ethical leaders are role models for the organization s values Ethical leaders are transparent and actively involved in organizational decision making Ethical leaders are competent managers who take a holistic view of the firm s ethical culture . Affiliative Leader Values people. and risk taking. and creates a strongly positive performance climate. Whereas transformational leaders strive to raise employees level of commitment and to foster trust and motivation. and interactional. 4. policies and problem areas were never enacted. such as realization of self interest or utility. If the leader does not put concern on the ethical issue. Kozlowski is using his absolute power supported by the decentralized system of the company to gain personal wealth. 2. Kozlowski has the knowledge and skills to manipulate. In this case. Mr. 2. Opportunity: Mr. Teleology Stipulates that acts are morally right or acceptable if they produce some desired result.B. Deontology Focuses on the preservation of individual rights and on the intentions associated with a particular behavior rather than its consequences 5. the leaders of the company in this case the most influental. Ethical Issues Intensity: the company does not put attention on unethical issues that occured in the company. 4. CEO of the company plays a role in determining the company s direction. Relativist Evaluates ethicalness subjectively on the basis of individual and group experiences. The leader plays a crucial role in ethical decision making. Those points supports Kozlowski s intention to pursue his personal ambition to gain as much wealth as possible. Virtue ethics Assumes that what is moral in a given situation is not only what conventional morality requires but also what the mature person with a good moral character would deem appropriate. Justice Evaluates ethicalness on the basis of fairness: distributive. . 3. A COMPARISON OF THE PHILOSOPHY IN BUSINESS DECISIONS A comparison of the philosophy used in business decisions are: 1. using whatever source he can use. ANALYSIS Based on Framework for Understanding Ethical Decision Making in Business 1. C. Awareness regarding ethical guidelines. 6. Utilitarianism Defines right or acceptable actions that maximize total utility or the greatest good for the greatest number of people. then the rest of the company will follow. Egoism Defines the right or acceptable actions as those that maximize a particular person s self interest as defined by the individual. Organizational Factor: Altough corporate and ethical culture was available. Individual Factor : Mr. 7. Kozlowski. including using company s funds and assets. procedural. 3. Respond and enforce consistently. 9. and make codes of ethics available and understandable Code of ethics was never sociliazed to employees. we can see that Mr. This can be proven by his ambition to acquire maximum profit and to dominate the industry by aggresively taking over other companies. if necessary. Conduct a rigorous self-assessment of the firm s values and its existing ethics and compliance program He never asses and apply the firm values and ethics. Kozlowski is a strong leader without an ethical behavior. 5. Ensure consistent implementation No implementation. Monitor and assess using appropriate methods No implementation. 6. post. A strong ethical leader must be a good role model and have courage and most complete information to make decisions that will be the best in the long run. and fairly No Implementation. Kozlowski clearly does not implement the 10 points of Leadership in Corporate culture. Kozlowski only focuses on his personal benefit. Maintain commitment from top managers Commitment was never shown by top managers. Strong ethical leaders must stick to their principles and. But in this case. His ambition to achievement by using every possible means available and only asses his employee s performance based on how they can contribute to increase the numbers . On Utilitarianism. Provide timely training to reinforce knowledge No training for ethical issues. 2. . Revise and reform to ensure continuous improvement No implementation. promptly. Provide confidential resources to whom employees can go for advice or to report their concerns No reporting procedures for ethical misconduct. Based on the comparison of the Philosophy used in Business Decision. 8. Based on his leadership style Mr.Based on the theory of the Role of leadership in corporate culture Mr. Publish. Deontology focuses on the preservation of individual rights and on the intentions associated with a particular behavior rather than its consequences. an unethical behaviour might be ethical if it brings benefit to all of people. 7. 1. Mr. Tyco scandal was unethical neither by Deontology or Utilitarianism. Communicate ethical standards through multiple channels No communication on ethical standards. 4. 3. be ready to leave the organization if its corporate governance system is so flawed that it is impossible to make the right choice. Based on the theory of Habits of Ethical Leaders. Tyco scandal violated individual rights. Clearly. 10. Kozlowski implements a coercive and transactional leadership style. Besides that. with process disciplines in place to hold them accountable: Leaders at the companies that ran into trouble had few systematic constraints on their actions.CHAPTER 4 SUMMARY From the case study we conclude that the scandal is proven wrong according to both theory Deontology & Utilitarianism. At Tyco. Tyco was led by intimidating strong leader and supported by yes' men and women. kept them very close. He designed a structure of loyalty around him with little accountability. and this meant people were extremely loyal to him. Top leaders need strong functional leaders who can push back. but there wasn't much assessment of their character. we conclude that there are 3 important points regarding the leadership crisis as shown below: 1. 3. . who in turn reported to the rest of the board members. 2. managers were evaluated based on their ability to hit their numbers. Leaders must have a "web of accountability" surrounding them. Boards and senior leadership teams must develop and implement sophisticated means to evaluate senior management character: In the companies that got into trouble. With pressures to make earnings forecasts. Strong functional leadership and mentoring are critical to the ongoing development of highintegrity leaders and employees: Absolute power tends to corrupt. Kozlowski took the company from $300 million to $36 billion with essentially the same leadership team. There was little mentoring in their functions. It allows an intimidating leader to do what he needs to do to get things done. It leaves an organization with very little character inside it. each Tyco s division president only reported to Kozlowoski. In the Tyco scandal. you are asking for trouble without that structure in place. Kozlowski. Mark Swartz at Tyco was not broad cross-functional leaders. He made headlines in the CFO magazines as the highest-paid CFOs. by design. 5. firms values and its existing ethics and compliance programs periodically. . ethical expectations associated with the provision be clearly specified and that the consequences of failure to comply with these basic standards be swift. Telling employees to do the right thing´ just isn t effective. and assessment of critical databases for reliability and validity. 11. 6. 4. and unambiguous. finance. Encourage upper and middle-level management to participate in meaningful education on the process by which ethical decision making in business and industry can be accomplished. Ethical dilemmas are not clear choices between breaking the law and being law-abiding. 8. and other areas should also play a strong functional role. Fit and proper test for selecting a competent leader that portrays seven habits of strong ethical leaders. 7. There should be a whistle blower policy in the company. they are at times complex moral mazes with no easy answers. Build a clear and strong organization structure to avoid absolute power. Establish internal systems for the periodic sampling. There should be a clear review and monitoring tool from the board of directors to the shareholder. severe.CHAPTER 5 RECOMMENDATION 1. 2. but a case can be made that it is unethical. It is not illegal to place the health of the company and investors money into risky investments for short-term profits. The evaluation system of the leaders should not only based on their contribution to financial performance but also considering leaders characters such the most important aspects to the long term success of the company. review. Asses and review the policies. legal. Leaders of HR. 10. 9. marketing. Create reward and punishment system to ensure sustainable ethics practices. 3. Ensure that among the guidelines provided to external. 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