Ethics Of Management: The Dennis Kozlowski Case
Prior to July 1992, their net profit was $95 million, the return on sales was 3.1%, and the stock price was $4.30. In July 1992, Dennis Kozlowski was appointed CEO of Operations.
With Kozlowski 's leadership, the company reached $5.1 billion in profits in July 2001. The return on sales was 13.8%, and the …show more content…
It hurt the company culture, because managers start to think they can do anything they want without being questioned. Kozlowski’s acts sent a negative message throughout the company 's workforce. If all the employees tried to do what Kozlowski did, the company would soon cease to generate any profit. Because of the corruption throughout the organization, it may not be able to motivate employees to work hard in return for their salaries, commissions and bonuses. Morally, ethically, and legally, Kozlowski had no right to use corporate money that rightfully belonged to all the …show more content…
In summary, before Kozlowski’s involvement, Tyco 's stock price was $4.30 per share, and ten years later, with his leadership, it increased to $58 per share. After this incident, the stock price fell to $16.05 per share. So his extravagant purchases helped to boost the outside economy, but the purchases took profit from Tyco International Ltd., its employees, and shareholders.
From the legal side, no law exists against overstating future cost, and Tyco could restate earnings when necessary. Also Kozlowski 's personal purchases at the company’s expense circumvented allowable business accounting procedures.
Tyco 's ethical duty was to show Kozlowski 's personal expenses in their financial statements. But business expenses were overstated and company funds were used for personal expenses. Ethically, managers are responsible to ensure that all profits generated by their company are either distributed properly among shareholders or invested for the good of company. In any case, it is not acceptable for any manager to abuse shareholder’s money for personal purposes. Therefore, Kozlowski’s acts were unethical.
The Securities and Exchange Commission (SEC), the authority responsible to ensure companies work properly, within their limits, was also affected by this case. The SEC’s efforts would be wasted if Kozlowski was set