View the step-by-step solution to:

Case Study: Tyco It's not impossible to pay $2,200 for a wastebasket and $6,000 for a shower curtain,103 but when you claim them as company expenses,...

This question was answered on Aug 17, 2012. View the Answer
Please read the Tyco case study in the attachment, then imagine you were the CEO of Tyco when the former CEO was still on trial for fraud, and you are trying to rebuild the company’s corporate reputation. Write a script for your address to the shareholders after 18 months in the position. (150 words)
Case Study_Tyco.docx

Case Study: Tyco
It's not impossible to pay $2,200 for a wastebasket and $6,000 for a shower curtain,103 but
when you claim them as company expenses, there will eventually be implications. This was
precisely the situation that led to the misappropriation of $600 million that was allegedly
stolen from Tyco and its shareholders,104 a multinational corporation dealing in industries
from hospital suppliers to fire sprinklers.105 At the beginning of 2002, it was uncovered that
the then-CEO Dennis Kozlowski and his associate, CFO Mark Swartz, were using the
company's funds for inappropriate purposes. The official company stance on the scandal was
reportedly, “Yes, they took the hundreds of millions—but the board let them do it.”106 In June
2005, Kozlowski and Swartz were convicted of conspiracy, fraud, and grand larceny107 and
sentenced to up to 25 years in jail.108
Within the organization, morale was low. There was a sense of frustration among
employees109 and when the new CEO, Ed Breen, stepped in to the top role at Tyco in July
2002,110 one of his major challenges was changing opinion of the corporation by
communicating how the company was changing. The core business at Tyco was strong, so
the focus of the change was never mediated by the possibility of bankruptcy. 111 In this sense,
Breen was fortunate, heading up a corporation with a strong operational and financial basis
on which to rebuild the company after the tarnished reputation that Kozlowski left behind.112 THE WAY TO INTEGRITY AND A CULTURE OF
In order to change the organization's practices, Breen initiated a turnaround team to modify
unethical behavior.113 The first steps that were taken were symbolic gestures to show his
determination to reinvent the company. Although he never openly commented on
Kozlowski's past behavior, his immediate replacement of board members spoke louder than
words.114 By the end of 2002, there had been a complete overhaul of the executive team,
with every member being replaced.115 Without delay, Breen also made the move from
Tyco's Manhattan office to a standard office in New Jersey—his office overlooked a car
park instead of Central Park.116 This symbolized that Breen was serious about changing the
company and the leadership style of the past.
Through a letter to employees and shareholders, Breen stated that Tyco's most important
commitment was to reinvent its credibility and integrity. A culture of accountability and
good corporate citizenship was promoted by the company117 and a change in the
infrastructure of Tyco was of utmost importance. In order to flourish, it was crucial that the
new management team re-create the way in which the organization functioned and the
practices that they used.118 This was reportedly initiated through a push to implement sixsigma training to increase the efficiency and quality of the company's services and
products.119 The dilemma was in how to communicate this change and the company's new
ethical stance to the 260,000 employees worldwide.120 THE WAY CHANGE WAS COMMUNICATED
The main way in which Tyco planned to communicate its new policies in relation to ethical
issues was through the development of a Guide to Ethical Conduct of Employees that outlines the regulations for the organization with regard to harassment, fraud, conflicts of
interest, and compliance with laws.121 The Guide was translated into the 26 languages that
were spoken in Tyco.122 An advisor from another company that had been through a similar
process said, “if you want to change the hearts of the 260,000 people here as to the ethical
climate they are working in, you need to bring to life this document.”123 In order to do this,
the Guide, which was launched worldwide using a mini–Web site,124 illustrated problematic
situations using vignettes. These vignettes were dramatized by the use of six short
The new code of ethical conduct was implemented in meetings around the globe in May
through June 2003;126 more than 2,000 Tyco locations showed the videos alongside of
corporate management making visits to Tyco sites.127 As Jorgensen outlines, “To roll out the
program, 500 human resources professionals trained approximately 20,000 managers, who,
in turn, cascaded the information through the employee base.”128 In conjunction with this, a
monthly newsletter provided employees worldwide with a column titled “A Matter of
Principle” where they could submit questions on ethical issues, which were then answered
and published.129 A Tyco requirement is that all staff sign off annually that they have read
the Guide, will adhere to its principles, and are unaware of violations of the principles in
their day-to-day work.130
Eric Pillmore, the person in charge of the rollout, acknowledged the need to localize the
Guide to ensure that it used words and language that resonated and were meaningful to
staff at a local level. There was also a need to make sure that it was not too U.S.-focused,
such as only using U.S. dollars to refer to money.131 For Pillmore, the message needs to be
developed at the top, but implemented by local managers: “The most effective work is done
from the bottom up… In the early stages, you have to make clear what the values are but
then allow local managers to develop their own materials. But, if we'd started that way, we
would have missed out on first developing an overall Tyco culture.”132 Later, Tyco
developed a similar Guide to explain Tyco behaviors with suppliers and partners. 133
Using this model, Tyco sought to create a control-lership guide134 to accounting standards
for the firm and hoped to gain more credibility within the community through reinforcing
lawful organizationwide practices. This communication strategy clearly had an effect. For
example, in December 2002, it received only a 1.5 rating on the Governance Metrics
International (GMI) 10-point rating scale, but by August 2005, this rose to 9.0, with the
company identified by GMI “as one of the most dramatically improved.”135
Even so, in 2007 and following a $2.89 billion settlement with shareholders over the earlier
fraud and overstatements in income, Tyco's CEO Ed Breen decided to break up the
company. In what Breen described as “a milestone in Tyco's history,” it was reported that
he spun-off “… its healthcare and electronics business … in order to shrug off its
chequered past and because of an underperforming share price.”136 As Maurer commented
in May 2007, “Dennis Kozlowski has cost Tyco a lot more than the $6,000 shower
(Ian Palmer 345-346)
Ian Palmer. Managing Organizational Change, 2nd Edition. McGraw-Hill Learning Solutions,
2008. <vbk:0077587448#outline(11.7)>.

Sign up to view the entire interaction

Top Answer

Dear Student Please find... View the full answer

Other Subjects - 8336915.doc

Question: Please read the Tyco case study in the attachment, and then imagine you were the
CEO of Tyco when the former CEO was still on trial for fraud, and you are trying to rebuild the...

This question was asked on Aug 15, 2012 and answered on Aug 17, 2012.

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors and customizable flashcards—available anywhere, anytime.


Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access or to earn money with our Marketplace.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
  • -


    Browse existing sets or create your own using our digital flashcard system. A simple yet effective studying tool to help you earn the grade that you want!

    Browse Flashcards