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Management Planning At Tyco Essay

1137 words - 5 pages

Management Planning at Tyco
David Heinauer
University of Phoenix
MGT/330
July 27, 2010
Instructor: Willetra Brittian

Management Planning at Tyco
Over the past decade, corporate greed has come to the forefront of the national news in America. Corporations such as Enron, WorldCom and Global Crossing have become synonymous with corporate greed and corruption. In 2002 Tyco joined these companies when its Chief Executive Officer and Chief Financial Officer were accused and later convicted of looting the company of $170 million in loans for themselves with no formal approval or knowledge to shareholders (Kemmerer & Shawver, 2006). Tyco’s Board of Directors started the planning that ...view middle of the document...

The executive planning to replace all senior management and the board helped Tyco restore investor confidence, enabling the company to begin recovery.
Tyco’s ethical challenges were enormous. Kemmerer & Shawver (2006) suggest that the failure of Tyco’s leaders to create and ensure ethical top-down organizational values eroded the corporations’ ethical values. Pressures resulting from the ethical collapse from both investors and society led to the massive ethical reforms at the top-management level, requiring extensive planning to create and ensure these values are passed down. Senior management’s plan called for its new strategy to create a corporate governance czar, a senior vice president position. This new position reports directly to the Board of Directors nominating and governance committee, with a dotted line relationship to the CEO. The position was responsible for creating a comprehensive process to ensure effective corporate control and prevent any abusive power by corporate management (Pillmore, 2003). Changes from this new position are viewed as positive. Governance Metrics International, a governance-rating consulting firm, increased Tyco’s governance rating from a 1.5 out of 10 in December 2002, to a 9.0 in August 2005 (Kemmerer & Shawver, 2006). The company distributes an in-depth ethical guide to all of its employees which is built upon several corporate core values including integrity, excellence, teamwork, and accountability. Every employee is obligated to assert acceptance and understanding of this guide. (Verschoor, 2006).
Legal issues from the scandal led to a comprehensive plan to establish extensive auditing processes and restructuring the organization to prevent corporate corruption from ever happening again. Tyco’s investigation into the activities of its senior managers was more extensive than any other company had ever done (Pillmore, 2003). Tyco conducted two levels of investigations. The first was into the activities of its senior executives. The second, phase 2, was into Tyco’s 15 largest acquisitions to determine if there had been any systematic fraud in the accounting for these transactions. Tyco also intensified its internal audits and operations reviews. Tyco’s senior vice president of corporate governance notes, “The companies top executives, its most trusted stewards, had acted improperly. How could we ensure it wouldn’t happen again” (Pillmore, 2003 p. 3)? The results of the investigations led Tyco to realize that there new strategy must plan to separate finance from operations. Historically, companies that suffered corporate governance breakdowns had one factor that stood out more than anything else: there weren’t clear delineations between...

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