Ethical failures and corporate governance at Tyco International

Ethics in Businesses

Over the last ten years the total number of ethics driven business scandals has risen dramatically. Where, many critics are now claiming that an ethics crisis has unfolded in the corporate world. To see the overall scope of this crisis requires examining the ideas presented in Business Ethics: Ethical Decision Making and Cases. This is because many of the different case studies were written during the middle of the financial crisis and talks about why such outrageous ethical acts have been occurring. Two areas of particular interest are: the cases of Tyco and Firestone, where both will show how various ethical issues are becoming more perverse. This is important because it provides the greatest insights as to how the various ethical issues emerged and unfolded, to have ripple effects on corporations around the world.

Tyco International Leadership Crisis

What are the ethical and legal issues in this case?

The ethical issues that would be facing Tyco would include: the influence that the CEO would have on the board of directors, how Kozlowski was able to create a culture that would allow the fraud to continue for so long and the role that outside influences would play in the decisions that were made by management. Some of the different legal issues would include: the company loaning money to CEO, the independence of the auditor from the management of the company and the way Kozlowski was able to steal $170 million in company funds with no questions being asked. (Ferrel, Fraedrich, & Farrel, 2009)

What role did Tyco's corporate culture play in the scandal?

Tyco's culture allowed the scandal to become worse because Kozlowski would support those employees who took the same kind of views as himself. This meant that these were people who would become involved in the fraud and cover up, then deny any kind of involvement. Over the course of time, this atmosphere of corruption would spread, as it would influence the decisions of the board of directors. (Ferrel, Fraedrich, & Farrel, 2009)

What roles did the board of directors, CEO, CFO, and legal counsel play?

There was interconnected role between the CEO, CFO and legal counsel. Where, these different management positions would help to hide the fraud that was occurring from the board of directors. As a result, the size and time frame of the fraud would become more severe, because they were able to hide what was occurring from the board for so long. (Ferrel, Fraedrich, & Farrel, 2009)

Can the SEC trust Tyco's new board?

Yes. This is because those members who were involved with Kozlowski were purged and none of the current members have committed any acts of wrong doing. These facts along with the Sarbanes-Oxley in place, means, that there is no reason for the SEC not to trust the board. (Ferrel, Fraedrich, & Farrel, 2009)

Firestone: A Reputation Blow Out

To what extent do companies need to make a proactive effort to collect and analyze data concerning possible safety issues?

Companies must be able to identify these different issues early, so that they can be able to understand the problems that are associated with various products that are sold to the general public. (Ferrel, Fraedrich, & Farrel, 2009)

What mistake did Ford, Firestone, and NHTSA each make in their early attempts to handle the crisis?

The mistake that Ford made was: to assume that the overall extent of the problems with Firestone's tires, were not isolated to them. Firestone failed to disclose the fact that it knew some of its tires had the obvious defect. The NHTSA was under regulating both companies, by not actively monitoring the company records and providing proper oversight, through random inspections. This would allow the problem to become worse. (Ferrel, Fraedrich, & Farrel, 2009)

What are the possible ethical implications of accepting responsibility vs. blaming others?

When a company accepts responsibility for their actions, they will receive negative publicity over the short-term. However, because they admitted that they were at fault and are working to fix the problem, means that the long-term effects will not be as severe. The moment a company begins to blame others, is when questions begin to arise about the company's practices. This is because such tactics make it seem as if management is trying to hide something, which causes investigators to dig even further. (Ferrel, Fraedrich, & Farrel, 2009)

Suggest measures that Firestone could take to improve tire quality in the future.

Several steps that the company could take to achieve this objective would include: improving safety monitoring standards, having increased transparency and improving the overall amounts of design / testing that takes place on the different tires. (Ferrel, Fraedrich, & Farrel, 2009)