Question

Case 2: Dennis Kozlowski came from modest circumstances. He began his career at Tyco International in 1975 as an auditor, and worked his way up the corporate ladder to become CEO in 1992. Kozlowski gained notoriety as CEO for the rapid growth and success of the company, as well as his extravagant lifestyle. He left the company in 2002 amid controversy surrounding his compensation and personal spending. In 2005, Kozlowski was convicted of crimes in relation to alleged unauthorized bonuses of $81 million, in addition to other large purchases and investments all for himself.

Questions of case 2:

a. What is the ethical dilemma here?

b. What could be a problem here? How can it be avoided? Explain.

Answer 1

a) In the given case of Tyco, some ethical dilemma are-

1) Case of unethical leadership- Kozlowski became the CEO of Tyco in 1992. The whole company's responsibilities were upon him. What Tyco needed was an exemplary and ethical leader. However Kozlowski's spent Tyco's money on himself . The actions he indulged in were illegal. His leadership was unethical.

2) Subordinates involved in unethical practices- Kozlowski not only indulged in unethical leadership practices but also involved his high ranking subordinates to keep his practices a secret. He also asked his lower subordinates to cover up for his business malpractices in exchange of financial benefits.

3) Auditing conducted on Tyco was also unethical- The auditing firm for Tyco was PwC (Price Waterhouse Coopers). PwC failed to bring forth the illegal transactions of the CEO.

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b) The main problem in this case was the choice of taking unethical route over the ethical route. Kozlowski in his greed indulged in illegal financial transactions. He failed to lead the organisation. His subordinates in fear of losing jobs chose the unethical path of staying quiet in exchange of money. They became indirectly a part of unethical business practices. Lastly, it was PwC's responsibility to audit the firm with complete honesty, which they failed to do.

This problem could have been avoided if everyone would have chosen to play their roles in the organisation honestly and ethically. If the CEO had followed ethical business practices, his subordinates and employees would have been encouraged to do the same. The organisation would have been doing well, the financial records would have been clean thus, thus, preventing unethical and careless audits.

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