Mr. Kozlowski: The Role Of Personal Ethics In Business

There has been increasing numbers of concerns with the ethical leadership of organizations due to historical problems with company’s downfalls due to management. The unethical conduct of leadership is typically found when the organization does not enforce the ethical climate once determined as important. The paper focuses on different approaches for strengthening the leadership for the organization and enforcing the ethical climate. In addition, the important factors for a strong ethical climate are derived based on a solid foundation for an the organization’s policies and procedures and code of conduct. Organizations can accomplish ethical leadership and behaviors by enforcing and practicing the code of conduct and having a high level or integrity in the leaders that run the organization.

Ethics has been around for a long time. Merriam-Webster defines ethics as rules of behavior based on ideas about what is morally good and bad. It is an area of study that deals with ideas about what is good and bad behavior. Ethics has much to do with feelings and beliefs. If you feel deep down in your heart that something is not right, then it you should not do it. The Bible says, “So whoever knows the right thing to do and fails to do it, for him it is sin” (James 4:17 English Standard Version). Ethical business procedures include guaranteeing that the main legality is in place. Also, the company observes moral standards in its relationships with the people in its business community, which includes the most important people in their business, who are the customers. This report will discuss ethics in business, ethically transformed organizations; organizations preparation to make ethical decisions, ethical danger signs, and organizations that does business globally.

Buntrock did not act alone in this scandal. Many of his upper-level associates had a hand in this fraud. Other key players included: Phillip Rooney (President, COO and CEO for a period of the scandal), James E. Koenig (CFO and Executive VP), Thomas C. Hau (VP and Chief Accounting Officer), Bruce D. Tobecksen (VP of Finance), and Herbert Getz (Senior VP, General Counsel and Secretary). Each member of this scandal greatly profited in some way. Buntrock made over $16.9 million during the scandal. Rooney earned $9.2 million, Koenig over $900,000, Hau reaped over $600,000, Tobecksen over $400,000 and Getz gained $450,000.

The major conspiracy was uncovered by Manhattan District Attorney, Robert Morgenthau, who was investigating Kozlowski for income tax evasion for some fine art work that he had purchased. As Morgenthau kept digging into the record keeping of Tyco and Kozlowski, it was determined that there were other situations that had occurred, such as a 10 million dollar loan that was totally forgiven by Tyco, and all interest was billed to the corporation. It became apparent on January

Richard Scrushy defrauded, stakeholders, stockholders, and the community out of millions of dollars. His deceptive, unethical, and commanding behavior was the stone that caused the biggest misappropriation avalanche of all time. We must consider this question, how is corporate cheating happening and who is heading the deception? Behind every crime, there is a ringleader or a group of individuals "calling the shots." In this case, Scrushy was the one who told his "family meeting members" to "fix" financial records, so HealthSouth to meet or exceed the business financial goals. A person from the beginning may have the objective to cheat; others get sucked into the whirlpool of white-collar crime.

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

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 Chief Operating Officer of Tenens Corp., dba Essex Street Associates of Beverly Massachusetts embezzled for seven years the amount of $72.3 million. John Doorly started with the company as a clerk, and with hard work, was able to rise to the CFO position. The clients trusted him, the company trusted him.

Of the $600 million that was stolen, Kozlowski and Swartz used the money for personal purchases, such as paying for an expensive apartment located on Park Avenue, houses in Boca Raton, Florida, which is a very wealthy location, and high-end jewelry (Sorkin, 2002). There was also an occurrence of Kozlowski hosting a birthday party for his wife that cost millions, and even having Tyco pay for half of the tab (Sorkin, 2002). The party was located on an island in Italy called Sardinia (Sorkin, 2002). It’s not surprising that the two men used the money they stole to buy luxurious items, but if it’s apparent to others that the cost of all the purchases don’t exactly match their salary people are going to become suspicious (Sorkin, 2002). Kozlowski

It is only during moral lapses and corporate scandals that interest groups and the broader public ask themselves the fundamental ethical questions, who are the managers of the organization and were they acting with the ethical guidelines. For a long time, the issue of ethics was largely ignored, with organizations focusing on profit maximization. However, this has changed, and much attention is now focused on ethics management by researchers and leaders. The issue of ethics has arisen at a time when public trust on corporate governance is low, and the legitimacy of leadership is being questioned. Leaders are expected to be the source of moral development and ethical guidance to their employees.

Records falsification was not the only illegal activity the Rigas family was wrapped up in. The family used company funds, unbeknownst to their investors, to finance personal endevours and interests. Examples include using corporate money to build a $12.8 million golf course on the Rigas property, using the company plane for personal vacation trips including a safari to Africa, and funding for two Manhattan apartments for his family (Markon, 2014). Not only this, but John Rigas purportedly used the company jet to fly a Christmas tree two times to his daughter in New York (Barlaup, 2009)! All of these incidents are just brief excerpts of the fraud and misuse of company funds that John Rigas and his family committed without any intention of ever paying back into the company. These actions, namely lying and stealing, prove to be the heart of the two moral issues that will be further analyzed.

Plato once asked whether you would rather be "an unethical person with a good reputation or an ethical person with a reputation for injustice." Ethical leadership has long been a debate in regards to its importance and place in the universal business world.

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

Under financial pressure, Minkow started to commit fraud. He forged credit card applications, staged theft, used bogus financial statements, and used his networking skills to entice wealthy investors. The most serious fraud he made was inflating the value of the company’s insurance restoration contracts (Knapp, 2006).

Swartz borrowed millions in non-program loans to "purchase, develop and speculate in real estate; to fund investments in various business ventures and ownership of Tyco stock." (Sri Media 2002)