CHAPTER I

INTRODUCTION

I.1. The Background

Human beings are God's most perfect creation, both physically and in the

way of thinking. Thus making the man into a creature of the most decisive in the

sustainability of life on earth. Humans and the environment has a very close

relationship and mutually influence each other, if the people who live in the

environment that has a good personality, be appropriate ethics and norms, then

the environment will be maintained and protected environment.

Man who has a good personality will create a good environment, and so does

the man who has a bad personality will create an unhealthy environment. Man has

ethical in his life will have a clear direction for his life, and he can determine where

things are good for life and where the things he should avoid.

People who live in the ethics he would be able to bring himself, in an

organization where he became a supervisor in a company he would know what to

do, what are the rules that should he apply for the company that he can lead goes

well, the role of a supervisor is very influential in the implementation of good

corporate governance (GCG).

Good corporate governance (GCG) describes how well the implementation of

the governance of the company, all employees who are in the company to

participate and take part in the development and success of the company's

ongoing activities, and attract investors to invest in the company, and make the

shareholders believe and confidence in the performance of the company and

strengthen the cooperative relationship with the company.

Companies with the implementation of good corporate governance can be

seen also on how the company is environmentally responsible company, for

example, the implementation of corporate social responsibility (CSR). CSR is a

process with the aim to embrace responsibility for the company's actions and

encourage a positive impact through its activities on the environment, consumers,

employees, communities, stakeholders and all other members of the public sphere

who may also be considered as stakeholders.

Based on the above theory we will discuss the case of Tyco International ltd,

is a Swiss company security systems company incorporated in Switzerland have

been cases of frauds and fund companies conducted by Tyco's three top

corporate officers CEO, its CFO, and its Chief Corporate Counsel.

1.2. Identification of Issues

Based on the background of the problem, identify the problems and

limitations problem, then the problem can be formulated as follows:

Understanding the background of the Tyco case

Understanding the impacts of the case

1.3. The Objectives Compilation

1.4. The Benefit Compilation

The expected benefits of the preparation of a paper on the ethics of this are:

1.5. The Systematics Compilation

Broadly speaking, the systematic preparation of this paper is divided into

four chapters, namely:

Chapter I: Introduction contains background of the problem, formulation of the

problem, the purpose of the preparation, compilation and systematic compilation

benefits.

Chapter II: The Identifications of that contains the human and framework, the

definition of environmental ethics, environmental ethics theories, the role of

humans in the environment, and the role of environmental ethics and ethical

behavior and environmental impact of deviations

Chapter III: The cover contains the conclusion of the problems described and

suggestions are to be conveyed, either for personal or group interests.

Chapter IV: Bibliography contains references, or literature sources used in the

preparation of this paper.

CHAPTER II

IDENTIFICATION OF THE CASE

2.1. Description Tyco situation before the scandal

Prior to the Tyco scandal, the company was one of America's largest

conglomerates, with operating revenues of 38 billion dollars and 240,000

employees, worldwide. Tyco Laboratories began operations in 1960, performing

experimental work for the U.S. government. The firm went public in 1964 and

quickly expanded, mostly by acquisition, to exploit the commercial applications of

its work. Dennis Kozlowski joined the company in 1975 as an assistant controller.

The company subsequently shifted its focus from growth to profits within its

three primary divisions: fire protection, electronics, and packaging. Kozlowski

joined Tyco's board in 1987 and became president and chief operating officer two

years later. Kozlowski engineered a coup to become Tyco's chief executive officer

(CEO) in 1992 and the chair of the board in 1993. He diversified the company,

branching into health care. Tyco eventually became the second largest producer

of medical devices in the United States. On December 5, 2001, the Tyco shares

were trading for 59.76 on the NYSE.

2.2. The Peoples in the company who involved in the scandal

The primary people that were identified for responsibility of the scandal were

Dennis Kozlowski and finance chief, Mark Swartz. Kozlowski joined the company

in 1975 as an assistant controller at Tyco. He worked in the company during a time

of rapid expansion and moved to the board of directors in 1987, become CEO in

1992, and became chairman of the board in 1993. Kozlowski was known for his

vicious acquisitions, and gained a lot of attention by his extremely lavish lifestyle.

Mark Swartz was the Chief Finance Officer of the company and worked

under Kozlowski. from 1995 through August 2002, and a Tyco director from

February 2001 through August 2002. It was determined during trial that the two

had worked synonymously in committing fraud, and working against the

shareholders.

Mark Belnick was served as Tyco's Executive Vice President and Chief

Corporate Counsel from September 1998 until June 10, 2002. Who helped lauch

efforts Mr. Kozlowski, made the Board Committees do not realize the fraud and

closed off from the public.

2.3. Scandal in Tyco International, Ltd

Dennis Kozlowski was a CEO of Tyco International,Ltd, at that time, he was

rolling along often using company money for his personal life, he is took $2 million

dollar 40th birthday party for his new wife on the Mediterranean island of Sardinia,

more than half of which was paid for by Tyco. The U.S Securities and Exchange

Commission (SEC) also took an interest and charges for civil fraud regard in

looting of the company and other misdeeds were laid on September 12, 2002, and

with his Tyco CFO Mark Swartz, they cooperate in the fraud within the company to

prosper themselves. An abbreviated version of the improper conduct of

management was published by Tyco in their SEC 8-K information filing with the

SEC on September 17, 2002. This pattern of improper and illegal activity occurred

for at least five years prior to June 3, 2002, L.Dennis Kozwolski was concealed the

activity from the Board and its relevant committees.

2.3.1. Relocation Programs

Mr. Kozlowski, Mr. Swartz and Mr. Belnick take interest-free loans that do

not qualify and gain unauthorized funds are not available for the entire company,

with big different loans, they use the grounds relocation loans to purchase real

estate and property.

Mr. Kozlowski improperly borrowed approximately $29,756,000 in non-

qualifying relocation loans to purchase land and construct a home in Boca Raton,

Florida during the years 1997 to 2000, and improperly borrowed approximately

$7,012,000 in non-qualifying relocation loans to purchase a cooperative

apartment in New York City in 2000.

In short:

$7,011,669 in interest free loans was charged by Mr. Kozlowski for

purported New York relocations that did not qualify under the New York

Relocation Program, $29,756,110 in interest free loans was charged by Mr.

Kozlowski for the acquisition of property under an unauthorized Florida relocation

program, and $24,922,849 in interest free loans was borrowed by Mr. Kozlowski

for the acquisitions of other properties that were not authorized by any relocation

program.

Of Mr. Kozlowski's total $61,690,628 of unauthorized interest free

relocation loans: $21,697,303 were actually repaid by him, but without interest;

$19,439,392 were repaid through unauthorized forgiveness, discussed in the

next section, that he bestowed upon himself, and $20,553,933 were reclassified

to other Mr. Kozlowski loan accounts that he maintained with the Company.

Mr. Swartz also borrowed approximately $20,992,000 in unauthorized

relocation loans purportedly to purchase property in Boca Raton, Florida during

the period 1997-2000. Neither of these programs was authorized by the

Compensation Committee or the Board.

In short:

$7,668,750 in interest free loans were taken by Mr. Swartz for property

acquisitions in New York and New Hampshire under the unauthorized New York

Relocation Program, $20,992,000 in interest free loans were taken by Mr. Swartz

under an unauthorized Florida relocation program, and $4,437,175 was

borrowed, interest-free, for the acquisition of other properties that were not

authorized by any relocation program.

Of Mr. Swartz's total $33,097,925 of unauthorized interest free relocation

loans: $10,786,977 was repaid by him, but without interest; $9,792,000 was

repaid through forgiveness that Mr. Kozlowski was not authorized to bestow; and

$12,518,948 was reclassified to other Mr. Swartz loan accounts that he

maintained with the Company.

Mr. Belnick used the unauthorized version of the New York relocation

program to borrow approximately $4,217,000 from September 1998 through May

2001, From 2001 through March 2002, Mr. Belnick borrowed an additional

$10,418,599 to purchase land and build a home. In short, this indebtedness was

not incurred through an authorized employee relocation plan available generally to

all salaried employees, and as such was not exempt from disclosure in the Company's

proxies. There was no colorable benefit to Tyco for any of Belnick's loans.

2.3.2. The “TyCom Bonus” Misappropriation

Mr. Kozlowski caused Tyco pay unapproved bonus to 51 employees who

had relocation loans with the company totaling $56,415,037, and to pay

compensation sufficient to discharge all of the tax liability, Mr. Kozlowski

($32,976,000) and Mr. Swartz ($16,611,000) received of which amount from

gross wages for paid by the company $95,962,000. The benefits weren’t approve

by or disclosed to the Compensation Committee or the Board Directors. The

employee who led by Mr.Kozlowski believe that they were part of a Board

approved program, they didn’t know the truth.

In short, the program was discriminatory in scope, terms or operation in

favor of executive officers. First, forgiveness was offered to some people who

never moved, some people at the operating division level who were never part of

the corporate relocation to Florida and people who did not even have a Tyco

mortgage. Second, forgiveness was never offered to those who were originally

eligible for relocation, yet declined to move. In short, forgiveness was never part

of the Florida Relocation Program, but rather was an extra-program benefit.

Regardless of advice that may have been offered relating to the disclosure

requirements for nondiscriminatory relocation benefits, the forgiveness benefit

was not applied in a nondiscriminatory fashion as part of a nondiscriminatory

program and, therefore, should not have qualified for nondisclosure.

2.3.3. The “ADT Automotive Bonus” Misappropriation

Mr. Kozlowski asked Tyco's to pay in cash awards of restricted shares of

Tyco common stock and payment of taxes associated with about 17 officers and

employees, while 17 officers and employees have been paid in full by Tyco. Mr.

Kozlowski and Mr. Swartz received a bonus of restricted stock and relocation

allowances are not recognized and not known by the compensation committee

and board of directors. Mr. Kozlowski made senior executives believe that ADT

automotive award of restricted stock is recognized program council.

2.3.4. The Key Employee Loan (KEL) Program

In KEL program case where many executive officers other than borrow

money to pay the taxes and borrowing the amount that exceeded the limit of the

maximum amount allowable under this program. Mr. Kozlowski is the biggest

players in the program, he took more than 200 loans KEL, some of the millions of

dollars and some of the small and the total he borrowed passes $ 250 million,

and loans that he did not use for the benefit of the company but for personal

interests such as purchase of real estate, yachts and maintenance. as well as

mr.swartz than buying for personal use he has also initiated a variety of business

investment at risk.

2.3.5. Attemted Unauthorized Credits to Key Employee Loan Accounts

In this case Mr. Kozlowski and Mr. swartz trying to clear outstanding debt

KEL by Mr. Kozlowski for $25 million and Mr. swarzt of $12.5 million without the

knowledge or approval of the compensation committee. Mr. Kozlowski through

his attorneys to Tyco he admitted that he did not get approval for a loan he did at

KEL. He admitted that it was not true and he was obliged to pay the amount to

Tyco, as well as mr. swartz willing to pay the debt with interest and he has paid

most of the amount. Tyco has reversed these entries and a related unauthorized

entry, thereby increasing the outstanding balances for the KEL accounts of each

individual involved

2.3.6. Executive Compensation

On this problem, Mr. Belnick as Chief Corporate Counsel received

compensation totaling $ 34,331,679 from 1999-2001, from the result of a secret

agreement with Mr. Kozlowski, Mr.Belnick awarded undisclosed incentives to

assist and facilitate Mr. Kozlowski diverting company funds for personal gain.

they make the letters included in the letter agreement dated August 19, 1998,

and signed by Mr. Kozlowski, then Mr. Belnick keep the letter in his private office

that is not known by the Tyco board, the board's compensation committee or

resource departments of Tyco.

2.3.7 Perquisites

In this case, Mr. Kozlowski and Mr.Swartz to earn extra income in excess

of $ 50,000 per year, which should be reported to the proxy, but they do not

report to the proxy on the addition, they are able to restore more enterprising

than that amount, but they are unable to return any additional income earning

more of that amount to the company. Tyco now know Mr. Kozlowski several

times to make personal use of property in north hampton, NH, Boca Raton, FL,

NYC, and New castle, NH.

2.4. Self Dealing Transactions and Other Misuses of Corporate Trust

2.4.1. Kozlowski Evidence Tampering

At least for the last five years, Mr.Kozlowski has systematically abused his

position and caused Tyco to expend funds for his personal benefit, which did not

advance the Company's interest in any colorable way.

2.4.2. Kozlowski Bargain Sale

Upon Mr. Kozlowski's instructions, a Tyco subsidiary purchased a

cooperative apartment in New York City in November 1998 for $5,547,248 and

made subsequent improvements to it. Without authorization from, or approval by,

the Board or its Compensation Committee, Mr. Kozlowski purchased this property

from the Tyco subsidiary in May 2000 at the depreciated book value of

$7,011,669, rather than its then current market value. In its civil action against Mr.

Kozlowski, Tyco seeks to recover for this bargain sale.

2.4.2. Overpayment to Kozlowski.

Without disclosure to, or approval by, the Board or its Compensation

Committee, Mr. Kozlowski and others caused a Tyco subsidiary to purchase

property in Rye, New Hampshire from Mr. Kozlowski on July 6, 2000 for

approximately $4,500,000. After an appraisal in March 2002 valued the property at

$1,500,000, Tyco wrote down the carrying value of the property to the appraised

value and charged Mr. Kozlowski's $3,049,576 overpayment to expense. In its civil

action against Mr. Kozlowski, Tyco seeks to recover this overpayment.

2.4.3. Kozlowski Non Legitimate Business Expense

Mr. Kozlowski also used millions of dollars of Company funds to pay for his

other personal interests and activities during the Relevant Period, including a

$700,000 investment in the film "Endurance"; more than $1 million for an

extravagant birthday party celebration for his wife in Sardinia; over $1 million in

undocumented business expenses, including a private venture (West Indies

Management - $134,113); jewelry ($72,042); clothing ($155,067); flowers

($96,943); club membership dues ($60,427); wine ($52,334); and an

undocumented $110,000 charge for the purported corporate use of Mr.

Kozlowski's personal yacht, "Endeavour." In its civil action against Mr. Kozlowski,

Tyco seeks to recover for these improperly expensed reimbursements.

2.4.5. Kozlowski Charitable Contribution for Personal Benefit

Also during the Relevant Period, Mr. Kozlowski caused Tyco to make

donations or pledges to charitable organizations totaling over $106 million. Of this

total, at least $43 million in donations were represented in transmittal letters or

otherwise as Mr. Kozlowski's personal donations, or were made using the

Company's funds for Mr. Kozlowski's personal benefit.

2.4.6. Walsh Payment

In early 2001, Frank E. Walsh, Jr., Tyco's Lead Director and the former

Chairman of its Compensation Committee, recommended to the Board that Tyco

acquire a financial services company, and later proposed that he introduce Mr.

Kozlowski to the Chairman and CEO of The CIT Group, a large financial services

company. Subsequent negotiations led to an agreement for Tyco to acquire CIT,

which closed in June 2001. After the terms of the CIT transaction had been agreed

to, Mr. Kozlowski caused Tyco to pay to and for the benefit of Mr. Walsh a $20

million fee for his role in the transaction.

2.4.7. Swartz Breach of Nominee Agreement

Since April 2000, Mr. Swartz has lived in a Tyco-owned apartment at 30 E.

85th Street, New York. On May 6, 2002, he caused the Company to enter a

notation in its books and records purporting to transfer title to that apartment,

including fixtures and furniture, to himself at its depreciated book value of

$9,646,975, which Swartz paid in cash. No appraisal was performed in connection

with this transfer. The transaction was not authorized, and on July 18, 2002 Mr.

Swartz agreed to reverse that transaction. Title to the apartment was never

conveyed to Mr. Swartz, and Tyco continues to hold title to the apartment.

Swartz's KEL account has been credited $9,646,975

2.4.8. Swartz Personal Expense Reimbursement

On March 1, 2002, without approval by the Compensation Committee or the

Board, Mr. Swartz caused Tyco to pay him a reimbursement of $1.2 million to

cover lost deposits on personal real estate transactions involving apartments in

Trump Tower on 5th Avenue in New York. Tyco will seek to recover this improper

reimbursement in arbitration.

2.5. The end of the criminal cases in Tyco International ltd 

Tyco announced that it had launched a civil lawsuit against Kozlowski for

breach of fiduciary duties, fraud and other wrongful conduct, and other lawsuits

against executive considered complicit in these schemes. This brings to three the

major suits faced by Kozlowski launched by New York, the SEC and Tyco, but

does not include class action suits by aggrieved investors. Tyco also began to

replace its board members.

On June 17, 2005, 58-year old Kozlowski and 44-year old Swartz were

each convicted of 22 of 23 counts including grand larceny, conspiracy, securities

fraud and eight of nine counts of falsifying business record. On September 21,

2005, Kozlowski and Swartz were sentenced to up to 25 years in prison. Many

observers thought that was about right, but others, including business leaders

thought it to be too much. In comparison, it was pointed out that some violent

crimes like rape and manslaughter carried a sentence of 20 years in jail.

In a related announcement, the SEC and the lead auditor of Tyco, Richard

Scalzo a partner with PricewaterhouseCoopers (PwC) agreed that Scalzo was

permanently barred from preparing financial statements of publicly traded

companies. The Tyco account was reportedly worth $100 million per year to

PwC, and they retained the audit. The SEC found that Scalzo “was ‘reckless’ and

stood idle as the conglomerates leading figures manipulated accounting entries

to conceal their lavish spending and pay”.

CHAPTER III

ANALYSIS OF THE CASE

3.1. Human and Universe for Tyco International, Ltd case

In this case there is no impact on the environment around Tyco

International Ltd., as there was no pollution or environmental Damage of this case,

but this case affect human behavior that is cheating. Mr. Kozlowski and Mr..

Swartz has been affected by a life of luxury that makes them violate the norms and

ethics that should be followed. they no longer care about the existing rules and just

follow their desire to continue to meet and satisfy their personal needs.

Mr. Kozlowski did not feel guilty for the theft that he has done with mark

swartz, she underwent a company with its own rules and with which he made his

own assessment without reference to ethics. human life without following values or

rules he would be a selfish man and running things according to his desire without

thinking of the consequences that would result from his actions. people who

behave badly will create an environment where he does not live in a healthy, as

well as with this case, the result of these actions the company is not able to run

properly.

3.2. Theory of Ethics for Tyco International, Ltd case

In this case for the relationship problems including ethical theories into

psychological egoism, psychological egoism is a theory that explains that all

human action is motivated by selfish, because of actions taken by Dennis

Kozlowski is a selfish act that harms others, for the sake of personal interest he

stole money that should be used for the benefit of the company by using his

position as ceo at Tyco International ltd , along with Mark Swartz he uses all

means to gain personal wealth and not think about the harm they caused.

The utilitarian approach, we first identify the various courses of action

available to us. Second, we ask who will be affected by each action and what

benefits or harms will be derived from each. And third, we choose the action that

will produce the greatest benefits and the least harm. The ethical action is the one

that provides the greatest good for the greatest number. Makes human beings

different from mere things is that people have dignity based on their ability to

choose freely what they will do with their lives, and they have a fundamental moral

right to have these choices respected. People are not objects to be manipulated; it

is a violation of human dignity to use people in ways they do not freely choose.

Deontology is different from consequentialism in that deontologists focus

on the obligations or duties motivating a decision or actions rather than on the

consequences of action. Deontological ethics takes the position that rightness

depends upon the respect shown for duty, and the rights and fairness that those

duties reflect.There is an indication that there is any higher power involved in the

case of Dennis Kozlowski. He operated on its own value, by the law that he had

made, and then excused himself, as he does not violate the laws.

The virtue approach to ethics assumes that there are certain ideals toward

which we should strive, which provide for the full development of our humanity.

These ideals are discovered through thoughtful reflection on what kind of people

we have the potential to become.

3.3. Good Corporate Governance for Tyco International, Ltd case

A set of rules that define the relationship between shareholders,

managers, creditors, the government, employees and other internal and external

stakeholders in respect to their right and responsibilities, or the systems by which

companies are directed and controller.Based on the principles of good corporate

governance in these cases Kozlowski does not do justice to his employees, he

gave bonuses to all employees not only to some employees, while he used then

are still available bonus funds for personal gain. the lack of fairness in the

distribution of bonuses to employees and officers.

Mr. Kozlowski was not transparent about the use of corporate funds report

to the board committees and stakeholders within the company, so no one knows

he has committed fraud, and because he used the funds are funds that are not

approved and known by the compensation committee of the board, due to lack of

disclosure to shareholders it shows corporate accountability is not good.

Mr. Kozlowski and Swartz are currently in the process account for his

actions, they received 25-year prison sentence, after they successfully uncovered

fraud by the Securities and Exchange Commission.

3.4. Corporate Social Responsibility in Tyco Internatinal, Ltd case

We thought Mr. Kozlowski did a good social activity, he did charity of his

own money, but the money he gave to charity from the act that violates the norm

or fraudulent results, according to our deeds he did to cover up cheating he did.

This continually strikes us as a strange way to look at things, because the money

was stolen to begin with. No amount of good that a person does with stolen money

changes the fact that is was stolen.

He cared about no one but himself and what he could achieve. It is

possible that he respected those lower than him because he gave to charities, but

I believe he only donated to charities as a tax shield.

He created his own rules and governed his own ethics. I believe that this is

why he never saw anything wrong with the things that he was doing. Even until the

end he maintained that he didn't do anything wrong. I believe that because he was

judging himself by his own standard, which was created by him, and realizing that

he had not broken any of the pre-established rules, he felt innocent. He had no

stakeholder interest in mind when doing the things that he did, and only cared for

himself.

3.5. Code of conduct business and professional code of conduct (accountant) in

Tyco International, Ltd case

The Tyco Guide to Ethical Conduct- has been developed to advise

employees on what the correct practices and procedures are, when working for

Tyco, the guide also outlines examples of unethical behaviour and ways in which it

can be reported.

In this case, Tyco International failed to give true financial picture for

several years. Dennis Kozlowski, Mark Swartz and Mark A. Belnick were those

Tyco’s executives who committed fraud by charged with falsifying business record

to conceal a great amount of loan without approval. Besides, it had been found out

that Tyco engaged in “financial gimmicky” to deliberate and manipulating its

earnings. Jerry Boggess, the president of Tyco Fire and Security is the one who

involved in bookkeeping fraud that affected the earning per share in Tyco in this

case. Besides, Dennis Kozlowski also indicted on tax evasion for avoiding just

over $1 million in New York State and local sales tax (Andrew and Alex, 2002). In

addition, Scalzo (Tyco’s former auditor) who audited Tyco's financials from the

years 1997 until 2001, found that he failed to conduct sufficient steps in audit

procedures which related to certain executive benefits, executive compensation,

and related party transactions. Furthermore, he also engaged in improper

professional conduct.

Accountants and auditors in this case have breached their fiduciary duty.

They failed to provide an accuracy and reliability of financial statement and failed

to act in best interest of shareholders and stakeholders (creditors, bankers and the

users of financial information). They involved in earnings management and tried to

overstate the earning to show a more favourable statement. It is also called as

deception because they provided false statement and created untrue position.

3.6. Approaches to Ethical Decision Making in Tyco International, Ltd case

3.7. Questions of Tyco Looting Executive Style case

1. The pattern of illegal and improper conduct described above took place for at

least 5 years prior to june 3, 2002. What red flags or governance mechanisms

should have alerted the following people to this pattern :

a. Tyco management accountans?

b. Tyco internal auditors?

c. Tyco external auditors?

d. Tyco board of directors?

Answer :

Dennis Kozlowski persuaded all accounting manager stotake risks, tobe

"creative" in their accounting practices, and the way they report the numbers.

They present fraudulent transactions and take the money they receiveis not

actually for, and excessive spending. They do not matter to investors who have

long-term investing, making investors believe that the company was being

honest. Indeed all the practice they can only doin the shortrun, in the long run will

do all that they can’t be hidden and revealed in the company.

In the part of the board of directors, as CEO Dennis Kozlowski and CFO

Mark Swartzas do not want to see that the figures presented decreased

accounting manager, if they want to decrease the occurrence of all accounting

managers do what must be done. Kozlowski and Swartzare not documented

properly and through improper channels to approve benefits or bonuses. There

are bonuses and other forms of compensation provided to employees that senior

management do what ever they want to do. Because of the fear for a person who

violates the order or reveal what happened, then there is no whistleblower in the

ordeal.

Therefore, companies must modify their accounting methods with some sort of

regulation. Set the Auditor and the management(CEO, CFO and Chairman)

public companies to protect investors and maintain their confidence in publicly

traded companies.

2. Indentify and discuss the most important weakness in Tyco’s :

a. Internal controls, and

b. Governance systems

Answer :

Weaknesses in the control system in the Tyco is a lack of documentation of

any activity in the use of funds and other activities, and approval procedures for

each fund company does not get out too stringent oversight, making it Kozlowski

had no difficulty in doing misappropriation of company funds, so he simply get

the funds to his personal account. The Internal audit also reported directly to

Kozlowski rahter than to the audit committee, and Swartz submitted SEC

(Securities and Exchange Commission).

The vast amount of looting from Tycos is certainly not in the interesrt of the

remaining 210,000 employees, investors, and other stakeholders to the

company. Even though the looting was not disclosed to the board of directors, it

is their responsibility to oversee compensation of of executives, quality of

internals controls, and overall company performance, and we thinks, Kozlowski is

more of a leader than a manager. That is a weakness of the system of

governance Tyco, which also affects the internal control of the company.

Kozlowski was able to lead with way to build loyalty from the people who follow it.

He knows how to build teams and create groups and ensure that everyone feels

like a family. By doing so, he was able to gain loyalty and got a way with a lot

more than if he was just a manager.

Altough corporate and ethical culture was available, the leaders of the

company in this case the most influental, Mr. Kozlowski, CEO of the company

plays a role in determining the company’s direction. If the leader does not put

concern on the ethical issue, then the rest of the company will follow. The leader

plays a crucial role in ethical decision making.

Kozlowski has a strong vision of where the company is headed and led

others to follow that vision. Although thev is ionis to make all of his followers also

become corrupt.

3. Would a post SOX act whistle blowing program to the audit Committee of the

board have eliminated the improper and illegal actions? Why or why not?

Answer :

Whistleblowers may be the primary source that catching corporate frauds

run on. SOA may catch or prevent some frauds, but if no one has the courage to

be the whistleblower, whether an employee of the corporation, member of the

SEC, or auditor, these scandals may continue for years.

Furthermore,whistleblowers should be taken seriously or at least highly

considered.

The SOA has increased protection of whistleblowers in three prime ways,

recognizing that they may have significant roles in uncovering scandals

(Sarbanes Oxley and Whistleblower Protection, CPA Journal). Enhanced

protection of whistleblowers is extremely important, but it is difficult to analyze

whether these three areas are effective.

First, Public companies are required to have a system in place where

reports of anonymous whistleblowers can disclose their concerns or speculations

of the company. Second, Section 806 of the act states that “no publicly traded

company, or any officer, employee,contractor, subcontractor, or agent of such

company may discharge, demote, suspend, threaten, harass, or in any other

manner discriminate against an employee in the terms and conditions of

employment because of any lawful act done by the employee.” Lastly, Sarbanes-

Oxley provisions have made it clear that retaliation against whistle-blowers will

not be tolerated.

4. If you have been a professional accountant employed by Tyco during this time,

and you wanted to blow the whistle, who would you have gone to with your

story?

Answer :

Because this was occurring before 2002, an accountant didn’t have SOZ

protocols in place to refer to for guidance. However, reporting t the SEC or

United States Congress, utilizing the False Claims Act (1986) may have started

an investigation.

But we still thought Mr. Kozlowski is the brains of all the cheating they did

in the Tyco International, ltd. he who pioneered this scandal. therefore, we think

Mr. Kozlowski will be the first person we will report to the authorities the

commission of the crimes that occur within the company. after Mr. Kozlowski

caught the other parties involved in this crime will be revealed. which finance

chief, Mark Swartz. Kozlowski asassistant controller at Tyco, he is known for the

acquisition of the devil, and getting a lot of attention with a very lavish life style.

Mark Swartzis the Chief Finance Officer of the company and works under

Kozlowski. During the trial that the two have worked synonyms in the fraud, and

to work against shareholders.

5. Why were so many Tyco employees willing to go along quietly with the looting by

senior executives?

Answer :

51 employees received bonuses other employees may have been unware, naive,

or too concerned with avoiding retaliation.

6. How many years in jail do you think Kozwolski should have received for his white

collar crimes?

Answer :

we think the punishment should be accepted Mr. Kozlowski and Mr..

Swartz was sentenced to life imprisonment, or such systems are applied in china

is taking all things which he possesses of the crime proceeds to the company or

the state for restitution for the crimes he did, or give him a sentence in

accordance with the legislation in force the country. sentenced to 25 years in

prison but decided to Mr. Kozlowski and Mr.. Swartz is fair enough, and until now

the process is still ongoing until the end of their prison terms.

CHAPTER IV

CLOSING

4.1. Recommendation

After the analysis of problem issued from case study, we would like to give

some recommendations in order to improve the situation of the company. Conflict

of interest was the major issue in this case. The new management in the company

had elected a completely new board of director and assigned an independent

person to be the chairman, rather than a CEO to avoid the conflict of interest to

happen again. The actions taken by the company could be effective.

However, in our opinion, the company should also cultivate an ethical

corporate culture. To do so, code of conduct should be set by the company.

International Labour Organization mentioned that code of conduct is a company’s

statement to explain ethical standards and applications that should be apply by the

employees. Code of conduct could promote ethical and moral deeds among the

employees in the company. By following the code of conduct, the employees could

avoid themselves from convicting in conflict of interest. The guidelines to the code

of conduct should be given to employees so that employees could further

understand it.

Besides the set of code of conduct, the company should also organize

seminars and training for the employees in order to teach the employees to deal

with issue that related with conflict of interest for example the issue mentioned in

the analysis before, which are embezzling fund, accounting fraud, bribery and etc.

Whistle blowing culture should be encouraged to the employees during the training

and seminars.

Whistle blowing is an act that raises concern towards the person who

involved in wrong doing. While promoting the whistle blowing, the company should

also set up protections towards the whistle blower to protect them from the

possibility of being boycott by the colleagues. The protections given could at the

same time enable the whistle blower to raise the wrong doing of others without any

fear. The example of the protection that can be given by the company includes

keep the information of the whistle blower confidential. With a whistle blowing

culture, the fraud that may happen could be reduced.

Just as what had been mentioned in the analysis, leadership plays important

role in shaping corporate culture. The top management should have ethical

leadership so that the subordinates could have a good role model to follow. A

leader who is responsible and honest can help promote and transfer his or her

ethical and moral value to the subordinates. Hence, while recruiting new manager

or promoting an employee to become a manager, the criteria that company should

consider and emphasize not only the ability but also the personality and ethical

view of the person.

For the issue of inappropriate discharge of employees, we suggest that Tyco

International should provide sufficient notice and pay sufficient compensation to

the employees who have been discharged. The company should set the fairness

procedures in the process of discharging employees. The executive of Tyco

should know that employees are primary stakeholder in the company. They should

protect the employee’s right and respect them.

4.2. Conclusion

In every business, the company will always facing such ethical dilemmas and

then raise the ethical issues. Most of the ethical issues in the Tyco International

related to conflict of interest. Embezzling fund, bribery, accounting fraud were all

the issues that we had mentioned in the paragraphs before which relate to conflict

of interest. All these issues were also unethical in other perspective besides from

the perspective of conflict of interest. These issues had also breached other ethical

theories which we had further explained.

Due to the unethical issues that rose in the company, Tyco International had

faced the problem of sustainability. The company was nearly ruined by the

unethical leaders. From this point of view, we could conclude that ethics played

crucial role in sustaining the company. A company without ethical conducts will not

last longer than a company which has high and good ethical conduct.

As a conclusion, the company should play their roles by properly managed

their company by following the code of conduct and effectively controlled in all

division. By doing that, the company will run their businesses in ethical way and

those unethical issues such as embezzlement of fund, inappropriate employees

discharge, giving or receiving bribes, and also accounting fraud will not happen

again or at least will be decrease.

BIBLIOGRAPHY

1. Leonard J. Brooks , Paul Dunn - 2009 - Business & Economics.

2. Wikipedia, Tyco International,Ltd, http://en.wikipedia.org/wiki/Tyco_International

(accessed: Jakarta, Mei 09,2013)

3. www.google.com/search/gambar

(accessed: Jakarta, Mei 09,2013)

4. Dennis Kozlowski after going to jail, http://www.youtube.com/watch?v=5KTaloE-

3FM

(accessed: Jakarta, Mei 09,2013)

5. UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

http://www.sec.gov/Archives/edgar/data/833444/000091205702035700/a208939

8z8k.txt

(accessed: Jakarta, Mei 10,2013)

6. http://prezi.com/qvafyn4gydal/tyco-looting-executive-style/

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http://voices.yahoo.com/tyco-scandal-business-case-analysis-11330744.html?

cat=3, (accessed: Jakarta, Mei 10,2013)

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http://www.lawteacher.net/company-law/essays//unethical-issues-or-legal-issues-

in-tyco-international-company-law-essay.php#ixzz2SyckkQQs

(accessed: Jakarta, Mei 10,2013)

9. Kozlowski's Foundation Gave Little to Charity, Records Say

http://articles.latimes.com/2002/sep/17/business/fi-tyco17

(accessed: Jakarta, Mei 11,2013)

10.Press Release, Tyco Files Suit Against Former Chairman and CEO, L. Dennis

Kozlowski for Misappropriating Money and Assets From the Company

http://investors.tyco.com/phoenix.zhtml?

c=112348&p=irolnewsArticle&ID=33323&highlight=

(accessed: Jakarta, Mei 11,2013)

Enclosure