Who and How Was Affected?
Tyco, a manufacturer of a wide variety of goods from health care products to some electronics, occurred in the center of the greatest scandal in 2002. This scandal was raging on and on, involving new parties and unveiling new details. These details unveiled dirty deals of three people who enjoyed luxurious lifestyle, stealing from the company. The top management turned out to be the key player of the entire story.
There are lots of parties affected by the scandal. The company enjoyed sky-ranking profit margins, and turned into a conglomerate. Its strategy was built on numerous mergers and acquisitions before the scandal began. It immediately lost its share price and reputation as a reliable business partner. Kim Nguyen (2010) writes, “An infamous contradictory of the “social responsibility of business” would have to be the Tyco scandal.” For a long time the company is referred as to the one that had deceitful and unprincipled management. Since the early 2000 it has never experienced profits and success as earlier in its history.
The key persons in the scandal, namely CEO Dennis Kozlowski, CFO Mark Swartz and CLO Mark Belnick, managed to escape the first hearing in the court “due to a mistrial” (“The Biggest Stock Scams of All Time,” 2003). However, they were eventually sentenced to up to 25 years in jail. Before the scandal raged, they enjoyed lavish lifestyle that allowed Kozlowski to arrange $2 million birthday party for his wife. An interesting fact is that during his work in Tyco, he “was reported as one of the top 25 corporate managers by Business Week” (“The Biggest Stock Scams of All Time,” 2003).
Such deceitful and fraudulent actions resulted in huge losses for employees. According to Lori Thanos (n.d.), Tyco “had 240,000 employees at the time of the scandal, and many of those employees were affected gravely either by termination and/or losses in their pension funds.” Therefore, it puts people in a situation of exceptional hardship. It resulted in high rates of retirement and dismissal. It is said that the events in 2002 damaged trust in the company that have led to the loss of organizational spirit and reliability in Tyco.
Moreover, the entire situation demonstrated that the stock market and big business cannot be safe for both small and big investors. The Tyco scandal undermined trust in the stock market and fair share trade of millions of people. Some of them were left bankrupt as a result of Kozlowski’s affair. He managed to defraud and mislead “investors by keeping stock prices artificially inflated, not adding any lasting value to the organization for their stakeholders” (Thanos, n.d.). This breached ethical issues of the company.
Therefore, the scandal of 2002 has become a textbook example of the fraud of the highest level of management. It badly affected the development of the company by damaging the trust of its stakeholders. It involved not only investors and executives, but also staff. Lots of employees lost their pension funds that resulted in protests and numerous court trials. Moreover, Tyco has also become a famous example of the breach of corporate ethics and social responsibility of business. The largest conglomerate immediately turned into a middle enterprise with an ambition to survive in the market with the share price fallen by 80%. Still, there are ongoing debates regarding the fairness of the punishment of the key figures in the scandal.
References
Nguyen, K. (2010). Scandal and Ethics. UBC. Retrieved from http://blogs.ubc.ca/kimmmn/2010/01/12/tyco-scandal-and-ethics/
Thanos, L. (n.d.). Tyco International Ltd. Case Study: The Implications of Unethical Behavior. Northcentral University. Retrieved form http://www.aljinstudentresearch.org/thanossp15/
The Biggest Stock Scams of All Time. (2003). Investopedia. Retrieved from http://www.investopedia.com/articles/00/100900.asp
