Dennis Kozlowski: The Implications of Unethical Behavior

Leadership and business ethics are a powerful component of an organization’s success or failure. Before the corporate scandals such as Enron and WorldCom, success for organizations could be measured by profit and growth margins. There is a strong link between ethics and leadership because like ethics, it (what?) has been increasingly a topic of concern due to the risk in corporate downfalls and destruction based these two areas (Knights, p. 125 you might have mis-read this quote, since there’s a grammatical erroe in it. Check it again. ). Effective leadership is important in shaping the

This paper will first discuss briefly what ethics are and provide the definition for an ethical issue. An ethical leadership issue is identified and explained for this author’s practice area. We will then identify and discuss key strategies for leadership that are pertinent to the ethical issue. Next, empirical evidence which supports the strategies discussed will be analyzed. Then, the impact and importance of the strategies will be stated. The final step will be to provide a conclusion to the reader that summarizes the content and strategies.

The situation began to unfold when the Securities and Exchange Commission was probing into a restatement of the company's stock price. Kozlowski's business practices raised some eyebrows. In 1999, the Securities and Exchange Commission (SEC) initiated an inquiry into Tyco's practices that resulted in a restatement of the company's earnings. In January, 2002, questionable accounting practices came to light. Tyco had forgiven a $19 million, no-interest loan to Kozlowski in 1998 and had paid the CEO's income taxes on the loan. It was found that he company's stock price had been overrated, and that the CEO and CFO had sold 100 million dollars' worth of shares, and then stated to the public that he was holding them, which was a misrepresentation and misled the investors.

The leader’s good attitude and their role will be their ethics which is very important for organization development, and performance. i understand that characteristics , roles, and motivation are very important to develop an organization performance. Also, leadership is a process that consist of communication, motivation, help, ethical principle, and cooperate between leaders and follower to develop organization and gain common goal.

A. Belnick, Dennis Kozlowski, and Mark Swartz. They were charged with falsifying business records in order to conceal their questionable tactics in regards to getting loans without obtaining anyone’s approval. The earnings per share was affected negatively by the fraudulent record keeping, and the president of the Fire and Security division, Jerry Boggess, was an accomplice and fired as a result . After avoiding a million dollar tax bill for the purchase of artwork worth $14 million, Dennis Kozlowski was indicted for tax evasion by the DA of New York. Richard Scalzo was responsible for auditing the financials of Tyco. He participated in improper conduct because he did not implement the proper measures within his audit duties as it pertains

This paper will respond to three questions, “Are all managers leaders?” (Phillips & Gully, 2014, p. 425) “What are some common barriers preventing leaders from behaving ethically and how can these barriers be overcome?” (Phillips & Gully, 2014, p. 450) And “Is it possible for leadership substitutes to be effective?” (Phillips & Gully, 2014, p. 450)

Most notably was the Tyco International scandal which happened in 2002, during which the SEC filed fraud charges against the CEO of Tyco, Dennis Kozslowski.

The topic that we choose is “The relationship between Leadership and Ethics”. The term ethics has been defined as inquiry into the nature and grounds of morality or a branch of philosophy of human conduct and determine right and wrong (Ferrell, Fraedrich & Ferrell, 2010). In the other words, it includes study of general nature of moral, specific moral choices, moral philosophy, and rules or standards of governing the conduct of the member of a profession (Ferrell et al., 2010).

Leaders make critical decisions between right, wrong, and the lesser of two evils every day. These decisions can affect the person making the decision, their employees, and goals of the organization. There are many readings that describe ethics and leadership, but ethical leadership is basically knowing your inner values and having the courage to steadfastly live by them for the purpose of the common good. Southwestern College's Master of Science in Leadership program has given me a firm understanding of how important ethical reasoning is and how it impacts, good and bad, an organization.

In the ultimate analysis, organizational and leadership ethics is everybody’s responsibility, not just that of an elite few. This is because leadership is not a person or a position but rather a complex moral relationship between people, based on trust, obligation, commitment, emotion, and a shared vision of the good as cited in Johnstone, 2013).

Leaders are responsible for influencing followers to perform actions, complete tasks, and behave in certain manners. Effective leaders also influence processes, stimulate change in attitudes and values, and amplify empowerment and self-efficacy of their followers, as they foster the internalization of corporate vision. The nurturing aspect of leadership can also raise an organization’s culture and employee’s values to higher levels of ethical behavior. By demonstrating ethical leadership we promote a high level of integrity that stimulates a sense of trustworthiness, and encourages subordinates to accept and follow our vision (Mickey, 2013).

A leader isn’t always a manager, but can be a manager in an organization. When you combine the two into ethical leadership you have a strong dynamic. According to Yukl (2010) in cross-cultural research on the essential traits for effective leadership, integrity is near the top of the list in all cultures that have been studied. Most scholars consider integrity to be an important aspect of ethical leadership” (p. 409).

Main character in this fraud is Mr. Dennis Kozlowski, the CEO of Tyco. He misappropriated around $270 million through unauthorized loans, sale of Tyco securities and undisclosed compensation. In order to conceal these amounts, the compensation was incorrectly offset against unrelated gains. This led to violation of GAAP and misrepresented financial statements. For example, $44.6 million of bonuses were offset against gain from IPO of one of Tyco’s subsidiaries. They have also netted the bonuses with gain on disposal of business and gain on sale of common stock. According to ASC 718 Compensation, these and other bonuses should have been disclosed in operating earnings and should have decreased operating income. However, since they were offset against one-time gains, they did not have any impact on operating income. This “hiding” of compensation occurred on several occasions – the expenses were also netted against gain on sale

Wall Street can have a heavy influence on a company such as Enron's ethical standings. During the Enron debacle, Wall Street played a key role in the decision-making process for the leadership team of Enron. Wall Street roles in determining Enron's overall value as the company influenced Enron to push the boundaries of ethical standards. During the trial of Enron's executive's former Internet division chief of Enron Ken Rice testified: "That he and his co-conspirators chose to lie about their network's capabilities to gain credibility on Wall Street and boost Enron's stock value." (Flood, 2005) Enron's decision to inflate their values to Wall Street did exactly what the company executives wanted and the company's stock value skyrocketed. "Wall Street obediently obliged, inflating Enron's share value by as much as 75% from the time the company started bragging about its prospects." (Lashinsky, 2001) When Enron's bubble finally burst and

How do ethical values shape behavior in organizations? According to Saleem (2014), ethical values and behaviors of an organization are made up of organizations institutionalized philosophies along with the moral ideologies of its members. In addition, the codes of ethics help to enhance the moral reasoning of employees while shaping their behaviors towards morally questioning unethical situations. Organizational leaders are encouraged to build cultures of trust with leadership who establish concerning goals employees pursue y setting examples for others to follow (Crosbie, 2008). The leaders whom are able to build training and development throughout their organization helps design and build relationships characterized by collaborative behaviors those results in mutually beneficial outcomes (Crosbie, 2008).