Reference no: EM131450008

Question: The Rise and Fall of Dennis Kozlowski

The Dennis Kozlowski story could be titled "The Good, the Bad, and the Ugly." The good: As CEO of Tyco International, Kozlowski oversaw the growth of a corporate giant. At its peak, Tyco was gobbling up 200 companies a year. Under his leadership, the value of Tyco increased 70-fold. In 2001, Kozlowski proclaimed his desire to be remembered as the world's greatest business executive. The bad: Things turned sour when Kozlowski and his former chief financial officer were accused of running a criminal enterprise within Tyco. The two were charged with stealing $170 million (US) directly from the company and pocketing an additional $430 million through manipulated sales of stock, and found guilty in June 2005. The ugly: Kozlowski's actions almost destroyed the company where he worked for 27 years. In 2002 alone, the value of the company's stock dropped $90 billion! To understand Kozlowski's behaviour, we should look at the events that shaped his personality. He spent his early years in humble circumstances. He grew up in the 1950s and 1960s in Newark, New Jersey. He said he was the son of a Newark cop turned police detective.

Only after he was indicted did it come out that his father was never a police officer in Newark or anywhere else. However, his mother did work for the Newark Police Department as a school crossing guard. His father, in actuality, was a wheeler-dealer who was a practised deceiver and an effective persuader. He had a strong personality but, for the most part, kept his misdeeds to little white lies. Friends remember Dennis as an easygoing kid who did well in school without trying very hard. He was elected "class politician" by his high school graduating class in 1964. He went to Seton Hall, paying his way through college by playing guitar in a band. He served in Vietnam, held a few accounting jobs, and eventually joined Tyco in 1975. Over the course of the 1980s, Kozlowski's happy-golucky demeanor disappeared. As he climbed the ladder at Tyco, he became a corporate tough guy, both respected and feared. He eventually become CEO in 1992 and oversaw the rapid expansion of the company. Meanwhile, Kozlowski learned to live big. He had a $17 million apartment in New York, a $30 million mansion in Florida, and a $15 million yacht. He spent $20 million on art for his luxury homes. He took extravagance to the extreme-for instance, spending $6000 on a shower curtain! The more he made, the more he spent-and the more he allegedly stole. Although his total compensation was $170 million in 1999, it was not enough.

He manipulated the company's employee relocation fund and Key Employee Loan Program (the latter created to help executives pay taxes due on stock options) to take hundreds of millions in interest-free funds. In 2001, for instance, he gave his wife $1.5 million to start a restaurant, spent $2.1 million on a birthday party in the Greek Islands for his wife, and gave away $43 million in corporate funds to make philanthropic contributions in his own name. A former Harvard professor suggests Kozlowski was undone by a rampant sense of entitlement: "By entitlement I mean an aspect of a narcissistic personality who comes to believe that he and the institution are one" and thus "that he can take what he wants when he wants it."

1. How did Kozlowski's past shape his personality?

2. Does this case contradict the view that personality is largely genetically derived? Explain.

3. What does this case say about corporate ethics?

4. In the movie Wall Street, Michael Douglas's character says, "Greed is good." Is this true? How does this apply to Kozlowski?

5. "Kozlowski just did what anybody would do if they had the chance. The people at fault in this story are Tyco's Board of Directors for not controlling their CEO." Do you agree or disagree? Discuss.